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KARACHI: Though the rupee has been appreciating against the dollar in what dealers describe as a managed way, the market expects the local currency to break the Rs280 barrier by the end of this month.

At the same time, market players believe it will be difficult for the State Bank to engineer a weaker rupee to boost exports, arguing that past experiences of devaluation failed to deliver a sustained increase in export volumes.

Some currency experts said the scope for further devaluation to support exports was limited, particularly as the US dollar itself has come under pressure against major global currencies.

“There is no mathematical calculation behind this expectation that the dollar may slip below Rs280 by the end of this month. It is the market sentiment and it happens at the end of the year,” said Atif Ahmed, a currency dealer in the interbank market. He believes the dollar will slip below Rs280 only for a brief period.

Experts warn against devaluation, say past episodes failed to increase exports

Other experts said dollar demand would remain steady but sentiment had improved after a $3 billion rollover from Saudi Arabia, which they expect to support the rupee.

“If anything, the risk right now is that the rupee may trade below 280 per dollar, which could destabilise export-based industries, whereas a mild depreciation would be the right way forward,” said Faisal Mamsa, CEO of Tresmark.

During the current fiscal year, the rupee has appreciated gradually, with more noticeable gains since July 31, when the dollar hit its peak for the year. On July 31, the dollar was traded at Rs284.27, compared to Rs280.42 on the last trading day of the outgoing week.

One dealer noted that the US dollar has already lost about 12 per cent against major international currencies, arguing that the rupee had effectively helped the dollar remain relatively strong and stable in the local market.

Exports, however, have been declining. They fell 15.4pc in November, swelling the trade deficit for the first five months of FY26 to $37.2bn and putting pressure on the current account.

The market has been rife with speculation that the government is under pressure to devalue the rupee to support exporters, but the currency’s gradual appreciation has dismissed such perceptions.

“Yes, the calls for a weaker rupee have grown louder. You hear the usual arguments: global demand is soft, INR (the Indian rupee) drifting towards 90 per dollar, exporters cannot price orders due to high costs, and a correction will magically ‘fix competitiveness’,” Mr Mamsa said.

The rupee had collapsed from 180 to 300 against the dollar in just two years — one of the sharpest devaluations in the region. But there was no meaningful export boom, no import compression beyond what the SBP manually enforced and no structural improvement.

“A few publications this week are again glorifying REER (Real Effective Exchange Rate) and implying that a weaker rupee is somehow ‘necessary’. It’s a familiar narrative: REER goes above 100, currency is ‘overvalued’, therefore devalue it. It’s an incomplete way to look at a modern FX (foreign exchange) market,” Mr Mamsa said.

Currency experts also pointed out that the IMF has not treated REER as a primary barometer for the exchange rate since 2018, but exporters continue to exert political pressure for devaluation to shore up margins.

Published in Dawn, December 7th, 2025

KARACHI: The Pakistan Stock Exchange (PSX) managed to close the first week of December in positive territory, despite early volatility and a lack of positive economic triggers. Investors were seen taking profits after a turbulent start, but mid-week developments, particularly in the political and investment sectors, provided some much-needed optimism.

According to Topline Securities, the KSE-100 index rose by 0.24 per cent on a week-on-week basis, buoyed by the approval of the prime minister’s summary for Field Marshal Syed Asim Munir’s appointment as Chief of Defence Forces, ending months of uncertainty. Additionally, Saudi Arabia’s decision to extend its $3 billion deposit with Pakistan’s central bank for another year was a key catalyst for market recovery.

Pakistan’s headline inflation for November stood at 6.15pc, slightly down from 6.24pc in October, indicating a minimal change. Meanwhile, the country’s trade deficit for November widened to $2.86bn, a 33pc year-on-year increase. Exports fell by 15.4pc year-on-year, while imports saw a modest 5.4pc rise, further exacerbating the trade imbalance.

Other economic indicators showed mixed results. Cement despatches (domestic and exports) dropped by 3.2pc year-on-year in November, while urea offtake surged by 25pc year-on-year, driven by strong demand for the rabi season.

Index posts modest rise as political clarity and Saudi rollover boost investor confidence

On the foreign reserves front, the State Bank of Pakistan’s reserves increased by $14m to $14.57bn. The commercial banks’ foreign exchange holdings remained stable at $5.01bn, pushing the country’s total liquid reserves to $19.59bn.

The cement sector emerged as a major contributor to the KSE-100’s weekly performance, adding 535 points, with the sector benefiting from a 2pc year-on-year growth in local despatches. Meanwhile, the energy and petroleum (E&P) sector added 351 points, driven by progress on the LNG diversion plan and the auction of offshore blocks, which attracted Turkish investment.

AKD Securities noted that market participation dropped by 22pc week-on-week due to volatility, with average traded volume declining to 680m shares from 863m the previous week. However, the market closed on a positive note, largely thanks to developments on the political and international fronts.

According to Arif Habib Ltd (AHL), the KSE-100 index rose modestly from 166,677 to 167,086 points, a 407.88 points week-on-week increase. The IMF’s Executive Board’s anticipated approval of a $1.2bn disbursement under the Extended Fund Facility (EFF) and Resilience and Sustainability Fund (RSF) on Monday is expected to bolster investor sentiment further. Additionally, the government’s progress in tackling the power sector’s circular debt could provide further optimism.

The market’s current price-to-earnings (P/E) ratio of 8.43x is slightly below its 15-year average of 8.59x, while its dividend yield of 5.78pc is also somewhat lower than the historical average of 6.11pc. These factors make local equities attractive relative to other investment avenues.

Central government debt rose to Rs77 trillion in October, reflecting a 0.5pc month-on-month increase and an 11.4pc year-on-year rise. Despite this, the rupee showed signs of stabilisation, appreciating by 0.04pc week-on-week to close at Rs280.42 against the US dollar.

AKD Securities foresees continued momentum in the KSE-100 index, supported by successful IMF Executive Board approval, reduced flood impacts, and improved credit ratings by global agencies. These developments, alongside the likelihood of foreign portfolio and direct investment inflows, particularly from Saudi Arabia and the US, could provide a foundation for sustained market growth.

Looking ahead, AHL analysts expect the positive market sentiment to persist, particularly in the wake of an inflow of $1.2bn from the IMF.

The outlook remains cautiously optimistic, with investors focusing on economic stabilisation and political developments as key drivers for the market in the near term.Political stability and foreign support are key factors keeping investor confidence afloat, even as ongoing issues like the trade deficit and inflation continue to weigh on sentiment.

With key IMF approvals on the horizon, market participants will be closely watching any further developments that could affect the investment climate.

Published in Dawn, December 7th, 2025