Rupee rises further against dollar

KARACHI: The Pakistani rupee posted more gains against the US dollar in the interbank market on Tuesday.The rupee closed at 277.86 per dollar in the interbank market. The local currency had ended at 277.97 on Monday.

Traders said that the rupee continued to rise for the second straight session due to an increase in the supply of dollars caused by exporter conversions, despite the demand from importers.

The rupee closed at 278.87 against the dollar in the open market, compared with 278.98 in the previous session. According to traders, the rupee is anticipated to remain stable against the dollar in the near term as the market players will be watching Pakistan’s central bank interest rate decision, which is due this month Due to declining inflation, most analysts anticipate a 200 basis point (bps) cut in the benchmark interest rate at the SBP’s policy meeting on December 16. Analysts do not anticipate a significantly larger rate cut from the SBP as it has to maintain the fiscal and exchange rate stability while accounting for an inflation comeback in February of next year. Tresmark, in a client note said that earlier in the week, exporters were aggressively selling forwards which it expects to slow down if premiums do not pick up.

“At the moment, most corporates are securing cheap FE loans, as they too expect USD/PKR to remain stable in the foreseeable future,” it said. “While everyone knows interest rates are on the decline, we expect the central bank to conduct sell-buy swaps to unwind short swaps on its balance sheet,” it added. “This is one of the IMF conditions. That will keep the premiums propped up for some time. So, traders can keep an eye for swaps to rebound before declining again.”