Rupee seen weaker

The rupee fell against the dollar during the outgoing week, amid dollar demand from importers.

The rupee declined 0.93 percent in the interbank market during the week under review, despite receiving the first loan installment of $991.4 million from the International Monetary Fund under a 39-month Extended Fund Facility.

The IMF tranche increased the State Bank of Pakistan’s (SBP) foreign exchange reserves to $8.035 billion.

On Monday, the local currency lost 40 paisas to end at 157.32/dollar, compared with Friday’s closing of 156.92 in the interbank market.

The rupee weakened by five paisas and closed at 157.37 against the greenback in the second trading session.

Extending losses, the domestic currency on Wednesday finished at 157.88/dollar, a 0.32 percent weaker from the previous close. It fell for the fifth straight session on Thursday due to dollar demand from importers. Similarly, the rupee lost another 60 paisas and closed at 158.48/dollar.

The rupee lost 31 paisas to end at 158.79 against the dollar on Friday. The currency traded weaker due to some demand from importers and ahead of an announcement of the monetary policy by the central bank next week. The rupee extended falls on increased interest rate expectation.

The State Bank of Pakistan is most likely to increase the policy rate by 100 basis points to 13.25 percent on Tuesday, even some economists expect status quo in the interest rate.

Investors were worried about the persistent depletion in the foreign exchange reserves, dealers said.

Pakistan's foreign exchange reserves dropped to $14.259 billion during the week ended July 5 from $14.443 billion in the previous week.

The foreign exchange reserves held by the State Bank of Pakistan fell $189 million to $7.083 billion due to payments on account of external debt servicing.

In the open market, the rupee traded in the ranges of 157 to 158.79 against the greenback.

Dealers expect the rupee to weaken slightly in the coming week on the back of continued importers’ demand for dollars.

The IMF, in its staff report on Pakistan, said the State Bank of Pakistan is committed to a

flexible, market-determined exchange rate to correct imbalances and support the buildup of reserves.

“The SBP has announced this change to modernise the foreign exchange rate regime and the functioning of the financial markets, and to contribute to a better allocation of resources in the economy,” the report said.