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Rupee seen range-bound


July 7, 2019

The rupee gave a mixed performance against the dollar during the outgoing week. It appreciated in the first three trading sessions due to positive developments. However, the currency lost some value during the last session.

The foreign exchange market remained closed on Monday for bank holiday.

In the interbank market, the rupee on Tuesday — the first working day of the new fiscal year, gained Rs2, or 1.24 percent, to close at 158.06 against the greenback, compared with the previous closing of 160.05.

The first tranche of $500 million received from Qatar as placement of funds and monthly $275 million supply of oil on deferred payment from Saudi Arabia improved the dollar supply. Further, these inflows helped boost investors’ sentiment.

The rupee rose 0.28 percent to 157.61 in the second trading session on Wednesday.

The local unit managed to gain Rs1.04 to end at 156.56 against the greenback on Thursday; following the approval from the International Monetary Fund’s board for a $6 billion loan.

The IMF’s executive board approved a 39-month Extended Fund Facility (EFF) for Pakistan amounting to $6 billion. The IMF has also decided to release an upfront amount of $1 billion this month.

Investors are bullish that the IMF loan along with the financial assistance from other bilateral and multilateral lenders will ease pressure on the balance of payments and increase foreign exchange reserves.

The Fund’s support programme is expected to coalesce broader support from international creditors of over $38 billion, which will more or less cater to the external financing need of the country during the programme period.

The IMF sees flexible market-determined exchange rate and an adequately tight monetary policy to correct imbalances, rebuilding reserves, and keeping inflation low.

The rupee gave up some of its gains on Friday and traded weaker at 156.92/dollar. Dollar demand from importers and depletion in the central bank foreign exchange reserves, despite foreign inflows, dented the sentiments.

The rupee traded in the range of 157 and 157.50 against the dollar in the open market. Traders expect the trade more or less range-bound over the next week.

“The expectation of $38 billion to be received from international lenders during the IMF programme period is pretty good, so there is not much panic seen in the market. The rupee may continue range-bound trading, if no big imports or debt payments were due in the coming week,” a trader said.

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