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July 21, 2019

Rupee seen range-bound


July 21, 2019

The rupee posted losses against the dollar during the outgoing week amid dollar demand for import payments.

The currency remained under pressure because of some negative news on the economic front that was rescheduling payment against foreign debt, decrease in foreign direct investment, weak economic indicators and ultimately hike in the policy rate by one percent.

In the interbank market, the rupee fell 0.67 percent to 159.86 against the greenback in the first trading session due to dollar demand from importers and anticipation of further tightening of the monetary policy. It extended losses and closed at 160.05 on Tuesday.

The rupee ended higher at 159.82 against the greenback on Wednesday helped by upbeat data on the balance of payments. The current account deficit narrowed to $13.587 billion in July-June fiscal year 2019, compared with $19.897 billion in preceding year.

The rupee gave up gains and ended at 160.02 to the dollar in the fourth trading session.

Amid demand from importers before the weekend, the rupee lost another 17 paisas to close at 160.19 versus the greenback on Friday.

Dealers expect the rupee to stabilise at current levels in the coming week. However, the future course of the currency will be impacted by the outcome of the Prime Minister Imran Khan and the US President Donald Trump meeting in Washington on Monday.

PM Khan will travel to the United States on Sunday. He is expected to fetch foreign investment and get tariff concessions in exchange for assurance of full cooperation in ending the war in Afghanistan.

Analysts said a successful visit can have a far reaching impact on Pakistan economy that is passing through a crisis like situation triggered by falling foreign exchange reserves and low tax collection.

“A resumption of military and non military aid, along with pending CSF payment, in-line with past trend could help Pakistan’s external account,” said an analyst in the report issued by Topline Securities.

“Afghan region’s solution will help improve the relationship and attract much needed US investment in Pakistan. US has remained amongst the largest investor in Pakistan both in FDI and portfolio investment.”

In the last 17 years (FY02-18) US has disbursed $34 billion to Pakistan under various heads where major amount pertains to Coalition Support Fund (CSF) to the tune of $14.6 billion (43%) during the same period, according to report. Last CSF amount of $550 million was received in FY16.

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