Pakistan’s Forex Reserves Dip Marginally to $7.78 Billion

Pakistan’s Forex Reserves Dip Marginally to $7.78 Billion

The State Bank of Pakistan has reported a marginal 0.89% decline in foreign exchange reserves on a week-on-week basis, with the total now standing at $7.78 billion as of September 1, 2023. This announcement, made by the central bank on Thursday, reveals a decrease of $70 million compared to the previous week’s figure of $7.85 billion.

Debt Repayments Impact Pakistan’s Forex Reserves

The SBP attributed this decline in Pakistan’s forex reserves to debt repayments. The overall liquid foreign currency reserves, which include reserves held by commercial banks, amounted to $13.13 billion, with commercial banks accounting for $5.35 billion of the total.

July 2023: A Beacon of Hope for Pakistan’s Reserves

July 2023 witnessed a significant improvement in reserves, primarily driven by financial assistance from the International Monetary Fund (IMF) and supportive nations. The IMF’s fresh $3 billion loan programme, spanning nine months, injected approximately $1.2 billion into Pakistan’s reserves. Additionally, deposits of $3 billion from Saudi Arabia and the UAE bolstered the nation’s economic prospects.

China’s Role in Strengthening Reserves

China also played a crucial role through loan rollovers, further strengthening the reserves, which now cover almost two months’ worth of imports. While debt repayments temporarily impacted the reserves, the recent financial inflows have injected optimism into Pakistan’s economic outlook.

Dollar’s Firm Stance and Resilient US Economy

The US Dollar remains firm, and on Friday, it will attempt to defend or extend the weekly gains. During the Asian session, Japan will release Q2 GDP data. Later in the day, the highlight will be the Canadian jobs report.

Key Insights for Friday, September 8

Wall Street finished mixed, with the Dow Jones gaining 0.17% and the Nasdaq falling 0.89%. Caution still prevails in the markets. US Treasury yields jumped initially after the release of US economic data but later pulled back. The US 10-year yield settled around 4.25%.

US Economic Figures Bolster Dollar’s Position

Data released in the US on Thursday revealed a decline in Initial Jobless Claims to 216K and Continuing Claims to 1.679 million, surpassing market estimates. Following the report, the US Dollar Index reached a peak of 105.15, its highest level since March, before retracing slightly to 105.05. Economic figures bolster the “higher for longer” interest rates narrative and provide support for the US Dollar.

EUR/USD: Euro’s Struggles Continue

EUR/USD posted its lowest daily close in three months, just below 1.0700. The Euro appears vulnerable, moving with a clear downward bias and showing no signs of stabilization. The final release of Germany’s Consumer Price Index is upcoming, and no surprises are anticipated. Looking ahead, the European Central Bank (ECB) will hold its monetary policy meeting next week, and there is currently no clear consensus on what actions it may take regarding interest rates.

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