Rupee likely to remain flat

The rupee traded flat throughout the week led by insignificant dollar demand. However, the local unit is expected to continue a range-bound trading pattern in the coming week.

The rupee ended at 124.24 against the dollar when trading started on Monday. It maintained the level until Friday.

In the open market, the rupee saw a mild fluctuation due to an uptick in the foreign exchange demand. It closed at 125.60 to the greenback on Monday. It; however, concluded the week by trading at 125.50 against the dollar.

Investor sentiment remained dull for most of the week due to growing uncertainty about the economic policies of the government. The weak foreign exchange reserves and direct investment data further undermined sentiment in the currency market. Pakistan’s foreign exchange reserves fell 1.83 percent to $16.069 billion as of September 7.

The forex reserves held by the State Bank of Pakistan amounted to $9.624 billion, down $261 million, compared with the preceding week. The decline in the reserves is due to external debt servicing and other official payments.

The foreign currency reserves of commercial banks fell to $6.445 billion against $6.484 billion. Moreover, the country’s foreign direct investment (FDI) fell 40 percent to $288.2 million in the first two months of the fiscal year. However, workers’ remittances rose 13.45 percent in the first two months of the current fiscal year to $3.9 billion. “We expect a little movement in the exchange rate next week. “But what is important to see is that whether the State Bank would let the rupee gain and break the barrier of 124.25,” an analyst said. However, he proposed amendments in the Finance Bill 2018/19 could start to weigh on investor sentiment.”