Rupee seen trading below 280 per dollar next week

KARACHI: The rupee is anticipated to be under pressure, although it remains below the 280 per dollar level in the coming week, according to a report on Saturday.

This week in the interbank market, the local currency fluctuated within a narrow range, closing at 278.65 versus the dollar on Monday. Subsequently, it depreciated slightly to finish at 278.81 on Tuesday. However, it ended at 278.75 on Friday.

“While the currency traded sideways, traders are of the opinion that the rupee is feeling the heat of debt repayments, outflow from bonds (special convertible rupee accounts), profit repatriation and increased imports. They also think that weakening of regional currencies, especially INR (indian rupee), will put pressure on PKR, as will a rate cut (if any) on Monday evening,” said Tresmark in a note.

“The leading opinion is that there will be a minor adjustment to rupee rates, but they will still trend below the 280/$ level in the coming week,” it added. Tresmark expects the rupee to trade at 279 per dollar next week, 279.5 this month, and 281 in the current quarter.

Most analysts anticipate a 100 basis points (bps) cut in rates at the State Bank of Pakistan’s (SBP) upcoming policy review scheduled for Monday.

Last month, the SBP reduced the policy rate by 200bps to 13 per cent, marking the fifth consecutive rate cut since June. This brings the total reductions for 2024 to 900bps.

Pakistan’s foreign exchange reserves held by the central bank dropped by $276 million to $11.449 billion as of January 17. The SBP attributed a decrease in its reserves to the repayment of external debt.

The country’s forex reserves fell by $262 million to $16.189 billion. However, the reserves of commercial banks increased by $15 million to $4.741 billion.

According to the SBP’s data, foreign investors invested $51.978 million in T-bills by January 10, while they withdrew $90.510 million. This resulted in a net outflow of $38.5 million, with December’s outflow recorded at $156.1 million.

For the current fiscal year (from July 1, 2024, to January 10, 2025), foreign purchases of T-bills have totalled $963.4 million, compared with withdrawals of $821.4 million, leading to a net inflow of $142 million.