Rupee likely to remain range-bound as market focuses on budget

KARACHI: The rupee is expected to remain range-bound in the coming sessions as the market focuses on the federal budget for the fiscal year 2026, which is set to be unveiled next week.

This week, the rupee breached the 281.9 level against the dollar in the interbank market, closing at 281.97 per dollar on Monday. It then fell to 282.22 on Wednesday but recovered to close at 282.17 on Thursday.

There will be four trading sessions in the currency markets next week, as they are closed from June 6 to June 9 for the Eidul Azha holidays.

“Market participants will closely monitor the measures to be announced by the government in the upcoming budget. The budget will be revealed first, followed by the monetary policy statement,” said an analyst.

“The rupee is expected to stay range-bound as investors assess forthcoming data and policy signals. Ongoing attention to budget outcomes and macroeconomic indicators will impact the rupee’s direction in the near term,” the analyst added.

The annual budget for the 2026 fiscal year is scheduled to be unveiled on Tuesday, while the State Bank of Pakistan (SBP) will announce its upcoming monetary policy on June 16.Analysts note that commercial banks have reportedly been delaying import payments due to a shortage of foreign currency. This shortage is mainly attributed to significant foreign loan repayments due before the end of this month and the necessity to meet the reserve requirements set by the International Monetary Fund (IMF).

However, data from the Pakistan Bureau of Statistics (PBS) showed this week that the trade deficit shrank to $2.6 billion in May, representing a 23 per cent reduction from the previous month. While exports rose 17 per cent month-on-month to $2.6 billion, imports decreased 8.0 per cent MoM to $5.2 billion. The trade gap increased by 11 per cent year over year to $24 billion in the first 11 months of fiscal year 2025 from $21.7 billion in the same period last year.

The central bank’s foreign exchange reserves decreased by $7 million to $11.509 billion as of May 30. The total liquid foreign reserves held by the country also reduced by $39 million to $16.598 billion. Similarly, the reserves of commercial banks fell by $32 million to $5.089 billion.