Rupee seen stable next week

KARACHI: The Pakistani rupee is expected to remain broadly stable in the coming week, helped by reduced payment pressures and improved supplies amid Eid-related inflows.

On Monday, the rupee closed at 282.06 against the dollar in the interbank market, but it lost value and ended at 282.17 on Tuesday. However, the local currency regained some strength and closed at 282.02 on Friday.

Tresmark, a financial terminal, in a client note published on Saturday, expects the rupee to trade at 282 against the dollar next week.

“With payments pressure easing, the rupee held its range last week,” it said. “While markets are rife with rumours of an imminent depreciation, there’s little fundamental justification for it. Even open market rates have stabilised,” it added.

Traders said that improved dollar availability, facilitated by remittances from Pakistanis working abroad ahead of Eidul Azha, is likely to help the local currency maintain its value against the dollar. Additionally, the ongoing improvement in the central bank’s foreign exchange reserves has boosted market sentiment.

The forex reserves held by the State Bank of Pakistan increased by $70 million to $11.516 billion as of May 23. However, the total liquid foreign reserves held by the country dropped by $12 million to $16.637 billion. Similarly, the reserves of commercial banks fell by $81 million to $5.121 billion.

The SBP managed to increase its reserves despite external debt repayments, thanks to a current account surplus. Inflows from the International Monetary Fund (IMF) and rollovers from friendly nations also played a crucial role in bolstering forex reserves. The SBP received the second tranche of $1.023 billion from the IMF under a $7 billion loan programme on May 13.

The SBP purchased $5.9 billion from the interbank market between June 2024 and February 2025 to boost its reserves and meet external debt repayments. In February, the SBP bought $223 million worth of foreign currency from the market, up from $154 million in the previous month. Regarding the potential for a rate cut, Tresmark’s report said that bond markets are rallying, with yields on six-month and 10-year bonds falling by 75 basis points and 25 basis points, respectively. This suggests that the markets are pricing in a 50- to 100-basis-point rate cut. “The only real vulnerability lies in the external position, but with the rupee consolidating around the 282/$ level, a 100bps cut seems more likely. This already factors in a modest uptick in inflation expectations,” it said.

The SBP will hold its upcoming monetary policy meeting on June 16. This month, the SBP cut its key interest rate by 100bps to 11 per cent, marking the continuation of a series of rate cuts that reduced the rate from a record high of 22 per cent after a brief hold in March. The policy rate has fallen by 11 percentage points since June 2024.