Rupee may extend gains

The rupee posted significant gains against the dollar during the outgoing week helped by soft demand for foreign exchange from importers.

In the interbank market, the rupee appreciated by Re1 to 157.52 against the greenback this week.

The rupee also gained Re1 to close at 157.90 to the dollar. Dealers said soft dollar demand from importers sent the rupee higher in the currency market.

Dealers said the local unit gained strength due to the lack of import payments. Increased supply of the dollars also created enough liquidity in the market.

Strong remittances from Pakistanis living abroad, improved foreign exchange inflows and tight monetary policy were also supporting the local currency. Moreover, a narrowing current account deficit means the domestic currency may see further appreciation in the days ahead.

The current account deficit shrank 73 percent to $579 million in July from $2.130 billion a year ago.

The State Bank of Pakistan’s foreign exchange reserves stood at $8.238 billion as of August 17, compared with $7.280 billion in June.

“We don’t see a strong dollar demand outlook at least in the near-term,” another dealer said.

“The country is scheduled to make approximately $30 million debt repayments to the IMF in the first week of September; however, the forex reserves were adequate to support the stability of the currency market,” he added.

The rupee is likely to trade at 157 against the dollar in the coming weeks.

The central bank’s efforts to strengthen the anti-money laundering and combating the financing of terrorism regime curbed market speculation and discourage dollar hoarding and stabilised the rupee in the open market.

Forex Association of Pakistan President Malik Bostan said that the dollar buying has declined, owing to tough documentation requirements and strict monitoring mechanism for the exchange companies.

Other reason for weakening greenback demand in the kerb market is decline in the dollarisation of the economy, as people prefer to make investment in gold instead of dollars.

Pakistan is scheduled to make approximately $30 million debt repayments to the IMF in the first week of September; however, the forex reserves were adequate to support the stability of the currency market.