The Pakistani rupee has strengthened more than 7 per cent against the UAE dirham and the US dollar in the past month after the government launched a crackdown against the smuggling of the US dollar.

The South Asian currency has strengthened from 83.7 against Emirati currency in the first week of September to 73.1 at the end of the month, according to xe.com.

The rupee hit a record low of 307.1 against the US dollar (83.7 versus the dirham) on September 5 due to weakness in the economy, political uncertainty, demand for the greenback and hoarding of foreign currencies.

However, the government launched a crackdown against the smuggling of US currency, prompting hoarders and smugglers to sell dollars in the open and interbank markets. This prompted the rupee to rise from nearly 90 in the open market against UAE dirham to around 80 now.

Analysts expect the rupee will stay steady at the current levels if the government maintains strict controls on foreign currency smuggling.

“We see the rupee strengthening a bit further. But after the sharp rally in the past two weeks, we expect the rupee to stay steady around current levels shortly. Going forward, we see political stability and inflation will be the key factors dictating the South Asian currency,” said an analyst.

“The government's stern administrative action against the unlawful foreign exchange dealers and hoarders in commodity markets is stabilising the exchange rate, providing a respite to the imported inflation and easing out commodity prices. The State Bank of Pakistan has also maintained the policy rate to the previous level in view of anchored inflationary expectations,” Pakistan’s Ministry of Finance said in its September report.

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