Rupee may stay flat

The rupee remained volatile against the dollar in the interbank and open markets during the outgoing week, amid stronger dollar demand from importers, with speculation that the rupee could weaken further in the coming months dragged on the currency.

In the interbank market, the rupee ended the first trading session at 140.29 against the dollar, reportedly due to a strong demand for the greenback from banks and importers in the market.

However, the rupee managed to recover two paisas and closed at 140.27/dollar on Tuesday. The rupee closed flat in the third trading session in the absence of positive triggers.

It lost its firmness and lost two paisas against the dollar on Thursday. It closed at 140.20 versus the greenback.

The rupee fell to 140.78/dollar in the interbank market on Friday, hurt by stronger demand for the dollar from importers, amid weakness in the country’s foreign currency reserves. It was down 1.48 percent against the dollar in March. The rupee traded in the ranges of 140.50 and 142.30 to the dollar this week.

The local currency has fallen due to slow market adjustment factor and upcoming payment pressure next month. Further, the market is anticipating the rupee to weaken to 145 by the end of this fiscal year,” a dealer said.

Market participants have been anticipating a completely free-floating currency since Finance Minister Asad Umar’s interview to the Financial Times, where he said the country might secure a bailout package from the International Monetary Fund (IMF) in between $6 and $12 billion by the middle of May.

The International Monetary Fund mission chief for Pakistan visited Islamabad and Karachi during March 26 and 27, for introductory meetings with the authorities.

With an improvement in the external balance, as well as an increase in bilateral official inflows, the SBP’s foreign exchange reserves gradually recovered to $10.7 billion as of March 25. But reserves are still below the standard adequacy levels (equal to three months of imports cover).

The country received $2.1 billion during the week from China (total of $9 billion since the start of the newly-elected government in July 2018), according to the report released by Topline Securities.

Dealers expect the currency to maintain its current levels over the next week due to payments pressure.