Rupee forecast to trade stable next week

KARACHI: The rupee is expected to remain stable against the dollar next week, driven by healthy supplies and soft dollar demand from importers, dealers said.

The rupee ended Monday’s interbank trading session at 278.56 to the US dollar. On Friday, though, the local unit returned from its losses and closed at 278.46.

“Since importers and companies appear to have bought dollars to cover their year-end obligations and the government has paid off its external debt, we anticipate that the rupee will move in narrow ranges over the coming sessions,” a currency dealer said.

“Exporters are likely to enter the market to sell dollars, which will increase supply when combined with remittances,” the dealer added.

The forex market largely remained calm since May 2023 due to the narrowing of spreads between the exchange rates in the interbank and parallel markets, according to analysts.

A recent report by AKD Securities titled ‘Pakistan Strategy 2025’ anticipates that the rupee will stay stable supported by the International Monetary Fund’s programme and strong remittance inflows.

The IMF programme would ensure exchange rate flexibility, FX market functionality and strengthening institutions to safeguard financial stability, it said.

Meanwhile, continuing efforts to deepen the interbank FX market along with greater price discovery would further support currency stability, it added. Greater transparency in the SBP’s interventions and FX accumulation strategy would play a critical role in the development of the FX market.

A stable FX market has allowed the SBP to conduct sizeable FX purchases, which have helped build reserves, according to the report. During the period from June 2024 to August 2024, the SBP has made net purchases of $1.9 billion from the FX market. The IMF’s willingness to maintain the shortening of the period for repatriation of export proceeds as appropriate would enhance central bank leverage to maintain stability in currency, even with low FX reserves.