LAHORE  - At the time when regional currencies are experiencing a free fall against a strengthening dollar, Pakistani rupee has maintained its stability.

Financial market experts observed that Pakistani rupee did not face the same situation as faced by its regional peers because, during the last one month rupee shed only 0.6 per cent against the US dollar, signaling towards the stability of local currency at the time when US dollar is globally high in demand. Emerging market currencies such as Indian Rupee, Malaysian Ringgit, Philippine Peso and Thai Baht fell sharply in the last few weeks.

They believe that change in political canvas is the prime reason behind the rejuvenated investor confidence that has brought $59 million to Pakistan stock market in the past 30 days, and $208 million since elections while rupee has depreciated by only 0.6 per cent in the past month. Cumulative foreign inflow of $1.2 million (including Jan-May net FDI of $761 million and YTD FIPI of $410 million) has helped in easing the burden of IMF repayments of $1.4 billion and kept YTD rupee depreciation limited at 1.8 per cent.

They said that talks ongoing with the visiting IMF team regarding a fresh loan of $4.5-5 billion also kept rupee stable. This coupled with other likely inflows from US (CFS) and Saudi Arabian oil facility is likely to provide stability to Pakistan’s forex reserves and help the country to make IMF payment of $1.8 billion in 1HFY14. However in order to keep competition in the export market, some decline in rupee cannot be ruled out.  Financial experts at Topline securities maintained that ever since Fed Chairman announced that US central bank will slowly tapper off its quantitative easing program on the back of improvement in the US economy, many currencies have seen their value coming down against the green back. In Asia, this impact was further fueled by weak Chinese production data coupled with sell off in capital markets.

Asian currencies recently tumbled to 21-month low as US Fed in its monetary policy meeting on June 20, 2013 announced its plan to slow down the monthly bond purchase spree of $85 billion. Improvement on the US economic front means that the quantitative easing should conclude in 2014 as long as the economic improvement stays in line with Fed’s estimates. Furthermore, reports of contraction in Chinese manufacturing segment has also put additional burden on regional currencies.