Rupee seen stable next week

KARACHI: The rupee is expected to stay stable in the coming week due to improved dollar liquidity amid healthy inflows from remittances and greenback sales from exporters, dealers and analysts said.

In the interbank market this week, the rupee slightly strengthened versus the US dollar. On Monday, the local currency closed at 277.71 per dollar; however, on Friday, it had a minor uptick and finished at 277.51.

“Next week, we anticipate that the rupee will remain within its current ranges due to improved dollar supplies in the market, which are adequate to meet importer demand,” a currency dealer said.

Pakistan’s central bank’s foreign exchange reserves reached a nearly two-and-a-half-year high as of September 27, following the receipt of the first instalment of a $7 billion loan from the International Monetary Fund (IMF).

According to data released on Thursday, the reserves held by the State Bank of Pakistan surged by $1.168 billion to $10.7 billion, the highest since April 2022. The SBP’s reserves are enough to cover more than two months of imports.

The total reserves of the country rose by $1.110 billion to $15.983 billion, the highest level since June 2022. However, the reserves of commercial banks dropped by $58 million to $5.281 billion.

Last week, the SBP received $1.03 billion from the IMF as the first tranche of a $7 billion loan.

In its client note, Tresmark, a financial terminal, stated that foreign exchange reserves are increasing, the real effective exchange rate is consolidating and import demand is declining. All of these are positive for the currency.

Remittances are continuing to be the big kicker. Recent initiatives taken by the SBP to promote remittances through banks are having a robust effect.

It is now more beneficial to send remittances through proper banking channels than through the grey market - thus the meteoric rise. The report expects September too will see a remittance figure close to the $3 billion mark.

“The rupee has consolidated by only 35 paisas since the approval of the IMF loan. Which is not much, but against the usual tide,” it said.

“Though the rupee consolidated, the CB in most likeliness aggressively did sell/buy swaps. The effect this had, was that USD weakened slightly, but swaps rose substantially,” it added.

“One-month swaps went from 30 paisa to 170 paisa and 3-month went from 200 paisa to 370 paisa. Due to this, analysts are of the view that exporters will restart forward selling to make the most out of a range-bound rupee. Suggested tenors are still within three months,” it added.