Rupee to sustain current level

The rupee showed modest strength against the dollar due to increase in the country’s foreign exchange reserves. However, the local currency dipped one rupee/dollar in the open market last week.

The rupee closed at 125.04 against the dollar on Monday. However, it concluded the week by trading at 124.04 to the greenback.

The central bank’s foreign currency reserves surge to a three-month high of $10.350 billion as of July 27.

Pakistan’s total foreign exchange reserves rose to $17.079 billion to $15.728 billion. The foreign currency reserves of commercial banks stood at $6.730 billion as compared to $6.718 billion in the previous week.

The increase in the forex reserves is due to the inflows came from China last week. China agreed to provide $2 billion to Pakistan and out of that $1 billion was received in the previous week, while another $1 billion will come shortly.

Traders said the currency posted gains amid positive investor sentiment aided by foreign inflows. Investors also expressed the hope the new PTI government will bring economic and political stability to Pakistan.

However, the rupee may reverse its increasing trend if uncertainties about the IMF bailout for Pakistan were not cleared.

“We are a little bearish on the rupee at this moment, as the country needs more external financing to shore up its forex reserves,” a dealer said. “We expect the rupee to weaken to 125/126 in the interbank market in the coming week.”

“The external pressure is still really building at the moment. This is not good for the currency,” he added.

The rupee traded at 122 on Monday against the dollar in the open market, while it hovered at 123 at the close of the market on Friday.