Pakistani rupee jumps against UAE Dirham, what to expect ahead?  

Analysts anticipate the Pakistani rupee to stay stable at the current levels if the government keeps strict rules on foreign currency smuggling.

Introduction 

In the past month, the Pakistani rupee has experienced a remarkable strengthening of over 7% against both the UAE dirham and the US dollar. This surge in value comes in the wake of a government-led crackdown on the smuggling of US dollars, which has had a significant impact on the currency’s exchange rates.

Initial Weakness 

Before this recent resurgence, the Pakistani rupee had reached a historic low, with an exchange rate of 307.1 against the US dollar (or 83.7 versus the dirham) on September 5. This depreciation was influenced by several factors, including economic fragility, political uncertainty, heightened demand for the US dollar, and the hoarding of foreign currencies.

Government Intervention 

The Pakistani government’s intervention in the form of a crackdown on US currency smuggling has emerged as a pivotal factor in reversing the rupee’s downward trajectory. This stringent approach appears to have discouraged hoarders and smugglers, prompting them to sell their US dollars in both open and interbank markets.

Positive Impact 

The repercussions of this government action have been overwhelmingly positive for the Pakistani rupee. Its exchange rate against the UAE dirham has significantly improved, shifting from 83.7 in the early weeks of September to 73.1 by month-end. Similarly, the exchange rate against the US dollar has also shown signs of improvement.

Implications and Conclusion 

The strengthening of the Pakistani rupee against the UAE dirham and the US dollar holds potential implications for the country’s economy. It could lead to reduced import costs and contribute to greater economic stability. However, ongoing monitoring of this situation is imperative to gauge the lasting effects on Pakistan’s economic landscape.