Rupee may weaken

The rupee is expected to weaken further over the next week due to increased dollar demand by importers and the escalating political tensions between Pakistan and India, analysts said on Saturday. “In the coming week, the rupee is likely to face volatile trading amid significant dollar demand for import payments and uncertainty on Line of Control,” said Yaqoob Abubakar, analyst at Tresmark, an application that tracks financial markets.

“We see the rupee will trade at 160-161 against the dollar in the sessions ahead,” he added. The currency market saw only two trading sessions. Markets were closed from August 12-15 for public holidays in lieu of Eid ul-Azha. The rupee lost 51 paisa to close at 158.95 per dollar on Friday in the interbank market. In the kerb dealings, the rupee ended at 159.40 versus the greenback. That compared with 159.50 in the previous session.

The rupee was traded at 158.66 in TOM (one-day forward market) on Saturday as the US markets were closed.

The currency depreciated almost 14 percent against the greenback since the start of this year. It has fallen 43.4 percent since December 2017. Rating agency Moody's, in its latest report, said a sustained military conflict between Pakistan and India would slowdown growth through a prolonged hit to consumer and business confidence, as well as foreign direct investment. Pakistan’s foreign exchange reserves rose by 3.7 percent or $557 million during the week ended on August 9 due to official inflows, the central bank said.

The country’s foreign exchange reserves stood at $15.577 billion. It had amounted to $15.020 billion in the previous week. Foreign reserves held by the State Bank of Pakistan (SBP) increased by $535 million to $8.264 billion. The increase in the State Bank of Pakistan’s reserves is mainly due to inflow of $500 million received from the Asian Development Bank. The foreign exchange reserves held by commercial banks also rose to $7.313 billion from $7.291 billion.