(Bloomberg) -- Pakistan’s rupee is set to become the top performer globally this month as a government crackdown on the illegal dollar trade helped reverse its fortunes.

The rupee surged almost 6% in September, a remarkable feat as most currencies including the Thai baht and South Korean won tumbled against the dollar on speculation US interest-rates will stay elevated for longer. The currency rose 0.1% to 287.95 per dollar on Thursday, after sliding to a record-low of about 307 this month. Pakistan’s currency market is closed for a public holiday on Friday. 

“Many leakages were happening through illegal channels of hawala and hundi trade from the open market,” said Khurram Schehzad, chief executive officer of Alpha Beta Core Solutions Pvt. Ltd., a financial consultancy in Karachi. Hawala and hundi are an informal system of fund transfer common in South Asia.

“When the dollar rate reverses everybody, the hoarders, the exporters who are holding their export proceeds, start selling their dollars,” Schehzad said.

Pakistan’s government intensified efforts by running after people involved in the illegal dollar trade that helped the currency. The Federal Investigation Agency raided offices across the country, while security officials in plainclothes were deployed at money exchanges to monitor dollar sales. Prime Minister Anwaar-ul-Haq Kakar this week said the rupee’s gain is “fostering optimism for stability.”

The central bank also raised the capital requirements of smaller exchange companies and ordered large banks to open their own exchange companies to make the retail foreign-exchange market more transparent and easier to monitor. 


©2023 Bloomberg L.P.