Rupee inches down

KARACHI: The rupee edged lower against the dollar on Monday as investors were cautious ahead of the central bank’s monetary policy announcement due on December 12.

In the interbank market, the rupee closed at 283.90 to the dollar, compared with its previous close of 283.87. The rupee ended at 284.75 against the dollar in the open market, unchanged from the previous close.

“There isn't much of a catalyst available right now. Investors were hesitant to take on new risks and were waiting to see what decisions the State Bank of Pakistan would make on interest rates,” said an analyst.

“Notwithstanding a decline in remittances and foreign exchange reserves, the rupee remains steady. It appears that the government is committed to keeping the currency market stable,” he added.

A majority of financial market participants expect no change in the monetary policy. They believe inflation levels to remain elevated which does not justify a rate cut at current levels. The SBP left the policy rate unchanged at 22 percent at its last meeting in October.

Analysts expect the rupee to trade range-bound in the near term as a result of optimism that the International Monetary Fund will approve the next loan tranche of $700 million for Pakistan under its current loan programme. However, a backlog of import and profit repatriation payments could put pressure on the local currency.