Rupee grabs more gains on fresh dollar inflows

KARACHI: Rupee on Tuesday strengthened against dollar, extending gains for a second session following fresh foreign inflows, while Prime Minister Imran Khan’s statement and positive news on economic front also boosted the sentiment, dealers said.

Rupee closed at 158.06 per dollar in the interbank market, improving by 1.24 percent or almost Rs2 over the previous close of 160.05.

The rupee has recovered by Rs6 over the last two sessions. In the open market, the rupee gained Rs3.50 to close at 157.50 against the dollar. It had ended at 161 to the greenback on Friday.

Dealers said the currency continued its recovery on the first working day of the new fiscal year due to increase in the supply of dollar. “We saw dollar inflows in the last two sessions hitting the market,” a foreign exchange dealer at a mid-tier commercial bank said.

“The improvement in the rupee has been observed following Prime Minister’s statement that stability would return in the exchange rate in future as the tough months of May and June 2019 came to the end for the economy and also highlighted that there was no requirement from the IMF (International Monetary Fund) to further devalue the rupee,” he added.

Moreover, the first tranche of $500 million from Qatar and monthly $275 million supply of oil on deferred payment from Saudi Arabia also underpinned the rupee. Analysts are optimistic about the rupee, but say the future direction of the exchange rate will depend on Islamabad’s commitments to the IMF for securing the $6 billion bailout package.

“We expect the rupee to stabilise around 157.50 to 158.50 levels in the short-term, in the best case scenario,” said an analyst. The IMF’s executive board is due to meet on Wednesday (today) to consider whether the country is fulfilling tough actions to get $6 billion loan in next three years.

The letter of intent of the Pakistani government, which describes the macroeconomic policies contained in the Memorandum of Economic and Financial Policies, will be released after approval of Extended Fund Facility arrangement by the IMF board.

Mohammed Sohail, CEO Topline Securities, said, “The stability in the currency will rely upon the dollar inflows and outflows position and foreign investment environment”. “The rupee is likely to appreciate further in the next couple of weeks, but the higher debt repayments and the net international reserves target by the IMF could pave the way for the downside pressure on the rupee,” Sohail added.

Pakistan is expected to receive more than $12 billion from bilateral and multilateral lenders, commercial banks, issuance of Eurobonds and the IMF in the current fiscal year but the debt repayments will be $10 billion.