Rupee likely to gain

The rupee dipped to new lows in the first three trading sessions in the currency markets, but trimmed losses at the close of the week on suspected central bank intervention.

It deprecated 1.53 percent against the dollar during the outgoing week.

On Monday, the rupee ended at 149.65 per dollar, compared with 147.87 in the previous session.

Extending losses, the rupee fell to 151.92 against the greenback on Tuesday.

It fell to record low of 151.95 in the third session due to higher dollar demand and lack of the central bank support to rescue the battered rupee amid currency devaluation.

In the next session on Thursday, the currency recovered from record losses and closed at 151.45 due to dollar selling by some banks and tracking gains in domestic equity market.

Aided by improvement in dollar supplies, the Pakistani rupee continued to maintain its upward trend and closed higher at 150.91 per dollar on Friday. In the open market, the currency traded in the ranges of 151-154 against the dollar.

Many dealers expect pressure on the currency to ease further with strong remittances due to Ramazan and Eid.

The rupee is likely to trade at 150 per dollar over the next week. However, the rupee will reverse recent gains and weaken over the next month hurt by current account slippages and imposition of new taxes in the upcoming budget.

The SBP raised policy rate by 150 basis points to 12.25 percent on Monday in a bid to fight rising inflation after a steep increase in fuel and food prices and weakness in the rupee sparked by dwindling foreign exchange reserves.

Analysts said a major reason of rate increase was weak current account performance, which despite improvement was still at unsustainable levels.

Tightening of the monetary policy could help improve balance of payments further, they said.

The current account narrowed by 27 percent to $11.586 billion in the 10 months of the current fiscal year.

However, some analysts believe the rupee was in equilibrium and does not need further devaluation.

The external account is expected to get some relief from the pledged deferred payment facility by Saudi Arabia to Pakistan for the country’s oil imports, which will start from July 1.

Under the facility, the country will receive petroleum products worth $275 million every month.

Saudi Arabia is set to export petroleum products of $3.2 billion to Pakistan every year for the next three years.