• Value of other Asian currencies relative to the dollar decreased.
• Rupee outperformed global currencies, recovering all of its losses in Sept.
• The crackdown has worked in curbing the open market rate.

As a result of a crackdown on currency smuggling and illegal foreign exchange trade, the Pakistani rupee has become the best-performing currency in Asia so far this fiscal year, The News reported on Tuesday.

According to data based on the MSCI Asia Emerging and Frontier Markets Index released by Topline Securities on Monday, the rupee has appreciated by 1.7% versus the dollar between July 1 and October 9, 2023.

But at the same time, the value of the other Asian currencies relative to the dollar decreased. In relation to the dollar, the Malaysian ringgit plummeted by 1.4%, the Korean won by 2.5%, the Thai baht by 5%, and the Bangladeshi taka by 1.9%.

When Pakistan’s caretaker government took office in August, the currency was under tremendous pressure. But in September, the rupee outperformed global currencies, recovering all of its losses and rising by 6% against the dollar.

On September 5, the rupee plunged to a record low of 307.1 against the dollar, but since the country’s central bank and security forces started taking action the next day to stop black market activity, the rupee has recovered sharply. In just five weeks, the rupee has risen by about 9% against the dollar.

“The crackdown has worked in curbing the open market rate,” said Fahad Rauf, the head of research at Ismail Iqbal Securities. “The economic fundamentals have not changed. Any further appreciation would probably create another bubble. SBP should step in to buy dollars and encourage exporters,” he added.

In addition to a crackdown on illegal dollar transactions, the State Bank of Pakistan’s structural reforms related to foreign exchange companies, exporters selling dollars, and panic selling by hoarders have allowed the rupee to retain its upward trend.

The rupee closed at 281.65 per dollar in the interbank market on Monday. It ended at 282.69 in the previous session. Analysts expect the rupee to surpass the 280 per dollar level in the coming days. This assumption is due to a number of factors, including: the IMF appears to be moving towards approval; another tranche will give the rupee wings; the closure of the Afghan border has reduced smuggling, especially of gold, which was the primary means of wealth transfer; the current account is expected to show a surplus; and remittances are anticipated to come as a pleasant surprise.

The government’s attempts to eliminate the abuse of the Afghan Transit Trade (ATT) and the continued decline in oil prices will be very advantageous to the balance of payments, strengthening the rupee.