Rupee may remain under pressure

By Our Correspondent
June 20, 2021

KARACHI: The rupee is likely to remain under pressure next week due to higher appetite for the hard currency from importers and the corporate sector, while the lack of progress in talks with the International Monetary Fund (IMF) also put pressure on the local unit, traders said.

Advertisement

“The rupee has been weakening in the last couple of sessions, amid higher demand and weak supplies and the next week I expect the rupee to be under pressure,” a trader with a commercial bank said.

Importers and the companies are buying dollars, as they want to settle their bills before the fiscal year 2020/21 ends.

The rupee went down 0.44 percent against the dollar this week. It closed at 156.19 on Monday and concluded the week by ending at 156.89 to the dollar in the interbank market.

“Even though the range is narrow but 157 looks like a strong resistance level for now, a breakout above 157 and we’ll see the rupee depreciating fast to 160 levels,” Tresmark said in a weekly client note.

Possible reasons for the movement included sharp increase in the international oil prices, year-end reserves building by the central bank, expected foreign repayments of $430 million during the last 10 days of June and significant dollar demand under the Temporary Economic Refinance Facility (TERF) facility, it added.

Corporates who had availed of the concessionary refinance facility on import of plant and equipment were being paid by the commercial banks under the Temporary Economic Refinance Facility.

Some pressure was also due to the IMF doldrums and delay in the release of the committed tranche.

The rupee, along with other currencies, also took some hit after the Federal Reserve’s monetary policy direction, according to the report.

Analysts expect the local currency to trade in the range of 156 and 158 in the third quarter of 2021.

The local currency has been under pressure for the last couple of weeks. Some of the major reasons behind the decline in the rupee value are importing inflation, debt repayment and low remittances after Eid.

“We expect the rupee to be traded at 156.60 to 158 level by the close of this fiscal year,” said Yaqoob Abubakar from Tresmark that tracks financial markets.

“This is also to note that the government has to repay around $300 million to the International Monetary Fund this month,” Abubakar added.

Traders are expected to closely monitor the outcome of the Financial Action Task Force (FATF) plenary meeting that is scheduled to take place from June 21.

Meanwhile, the liquid foreign exchange reserves of the country inched up $8 million to $23.586 billion by the week ended June 11, 2021.

Advertisement