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Pakistan’s rupee rebounds from biggest tumble in nine years

LiveMint logoLiveMint 06-07-2017 Faseeh Mangi

Karachi: Pakistan’s rupee recovered from its biggest plunge in nine years ahead of a government meeting with bank presidents to discuss the currency’s slump.

The rupee strengthened 0.9% to 107.1 per dollar at 10:17am local time, recovering from a 3.1% slide against the dollar on Wednesday.

While analysts said the nation’s central bank had devalued the currency to its lowest level since December 2013 to boost the economy, finance minister Ishaq Dar called the weakening “artificial.”

The International Monetary Fund (IMF) in 2016 pointed out that the currency—which operates under a managed float regime—was overvalued by as much as 20% and hurting its exports.

The nation’s foreign exchange reserves have declined 10% so far in 2017 to $16.4 billion, covering a little over three months of imports, according to Insight Securities Pvt.

“The market is confused as to what the quantum of devaluation would be,” Zubair Ghulam Hussain, chief executive officer at Insight, said by email. “With multilateral agencies calling the rupee to be 5-20% overvalued, a 3% devaluation can only be a precursor.”

Dar is due to meet bank executives later in the day on Thursday, according to a statement by the ministry issued Wednesday.

In an interview in June, commerce minister Khurram Dastgir Khan said he was trying to persuade Dar to adjust the rupee’s value after the weakening of currencies by regional players including China gave them an edge over Pakistan.

The IMF in June said economic stability reached under a three-year $6.6 billion loan programme that ended in 2016 has begun to erode. Pakistan’s current account gap has more than doubled to $8.9 billion in 11 months ended May compared with $3.2 billion in the same period in 2016.

The “State Bank of Pakistan will continue to closely monitor the developments in the foreign exchange markets and stands ready to ensure stability in the financial markets,” the central bank said on Wednesday. Bloomberg

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