Rupee likely to remain stable

The rupee is expected to move within a narrow-range next week with little volatility due to high dollar demand from importers, analysts said.

“We see the local currency to trade at 115.40/115.50 because of some downward pressure, arising from surging imports in the coming week,” an analyst said.

“We expect the central bank will maintain the exchange rate at 115.50 in the near-term. However, further currency devaluation is likely to take place towards the end of this fiscal year.”

Many analysts foresee the State Bank of Pakistan to hike the policy rate by another 25 to 50 basis points to 6.25 to 6.50 percent at its March monetary policy review meeting to be held later next week.

The SBP could tighten the interest rates further to balance the rupee devaluation.

The rupee hit a record low of 116/dollar in an intra-trade on Tuesday, but has managed to stem further losses since then. The rupee closed at 115 on Tuesday. However, it gradually lost some grounds in the interbank market and ended at 115.40 against the dollar on Friday.

The rupee fell more than three paisas in the open market. It plummeted to 114 and 115/dollar during the outgoing week.

Pakistan’s foreign exchange reserves dropped to $18.079 billion on March 16 from $18.240 billion a week ago.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased by $182 million. The SBP’s forex reserves stood at $11.944 billion as compared to $12.126 billion in the previous week.

The decline in foreign exchange reserves was due to payments on account of external debt servicing.

However, the forex reserves held by commercial banks increase to $6.135 billion against $6.114 billion in the preceding week.