KARACHI: The Pakistani currency has slowly and gradually appreciated by a cumulative 0.4% (or Rs1.12) in the past 26 consecutive working days. It hit a three-month high on Friday (September 12), closing at Rs281.55 against the US dollar, partially recovering from a 19 month low of Rs284.97/$ in mid-July.
Businesses are curious where the rupee will go from here, amid nationwide floods that have wiped out a significant part of standing crops and hurt the economy, which had started to stabilize over the past two years.
Financial experts at treasury firm Trasemark, Topline Research and Icon Management say the recent nominal gains are sustainable, but only in the short run. They see the domestic currency peaking out somewhere around Rs280-281/$ in about a month’s time.
They believe that, after a brief consolidation of the recent gains, the rupee will see a gradually loss in the medium to long run (three to nine months) by a historical average rate of 5%-6% ahead of the IMF second economic review due later this month, under its $7 billion extended fund facility (EFF).
Trasemark firm projected the rupee-dollar exchange rate will be at Rs281.60/$ in one’s week time, at Rs281/$ in one month and Rs282.50/$ in three months.
It linked the domestic currency’s journey with inflows of workers’ remittances for the ongoing month of September, noting that flows have slowed down in the first two months (Jul-Aug) of the current fiscal year 2025-26.
Trasemark said in its latest weekly commentary that “forex liquidity has improved over the last two weeks. Most banks are now square or slightly long, pushing swaps higher across all tenors. This has encouraged exporters to sell forward, creating a loop of liquidity. We see dollar-rupee stable through both policy events and possibly easing towards Rs281/$ by month-end.”
“Beyond that, the trend will depend on September remittance figures. We’ve had two consecutive months of lower remittances, and it remains to be seen whether this is a trend or just seasonal variance.”
The remittance inflows increased cumulatively by 7% for the first two months (Jul-Aug) of FY26, received at $6.4 billion in the months compared to $5.9 billion in the same period last year. They are, however, low compared to ones received in the months from Jan-Jun 2025.
Shankar Talreja, a senior analyst at Topline Research, said that the rupee is expected to remain stable over the short term. However, in the longer term “we expect currency to devalue in line with historical rate of 5-6% (by end of June 2026).”
He differed with Trasemark’s view and said presently remittances flows are strong and sufficiently handling the pressure from rising imports. Besides this, the central bank is also able to buy dollars from market. This suggest a stable currency outlook, due to strong supply in the market.
“We also did a survey from financial market participants representing banks funds and worthy family offices. Most of them are expecting the currency to remain in the range of 285-290/$ by December.”
The survey result suggests the currency will depreciate to Rs295-300/$ by June 2026.
Meanwhile Hassan Haider, a senior analyst at Icon Management, said that the floods and an increase in inflation beyond the projected 5%-7% will weigh on rupee-dollar parity in FY26.
Businesses, particularly exporters, demand the central bank cut its policy rate to a single digit from 11% at present and/or depreciation in rupee against dollar to get good profit.
The State Bank of Pakistan (SBP) will maintain status quo in the policy rate till December-January. After that it might consider increase in the rate instead cutting it. In this scenario, policy makers have to let the rupee depreciate to keep dollar inflows by exporters robust and to convince overseas Pakistanis to send remittances through official channels instead of unofficial channels in a hunt for better prices, he added.
He said that foreign currency inflows have remained stable at present, as a premium on the sale of dollars on three month futures counter in the inter-bank market has recently recovered to Rs3.75-4/$ these days. This suggests exporters are selling the dollar at Rs285/$ on three-month futures compared to Rs281.55/$ at ready counters.
The future rate also suggests a slow depreciation in the rupee in the medium to long run, as the ongoing appreciation spell will at the most take the rupee to Rs280/$ and “not beyond that,” he added.
A notable drop in premium usually sees exporters temporarily stopping selling dollars in inter-bank market, as they are allowed to receive export proceeds from their buyers over a three month period, as per regulations.
“The higher policy rate and/or average depreciation in the rupee against the dollar are also a must to attract foreign direct investment (FDI) and foreign investment in local equity and debt markers,” he said.
The upcoming IMF review for the third tranche of $1 billion may also weigh on the rupee-dollar exchange rate, as the lender wants tight policies to sustain economic gains.
The likely cut of 25 basis points in interest rate by the US central bank on September 17 would increase dollar supply globally. This may impact dollar-rupee pricing as well.
