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December 8, 2019

Rupee to stay firm

Business

December 8, 2019

The rupee posted moderate gains in both the currency markets during the outgoing week, boosted by strong foreign inflows, while positive macroeconomic indicators also aided the sentiment.

The local currency closed at 155.28 against the greenback on Monday. It had finished at 155.06 on Friday.

In the open market, the rupee gained 25 paisas to close at 155.10 against the dollar. Dealers expect the currency to gain further over the next week. “We saw increased inflows in the last few days. A positive economic outlook followed by lower current account deficit and stable foreign exchange reserves added to the rupee strength,” a currency dealer said.

“We expect the rupee to appreciate further in the coming days and the next level is 154.50,” he added.

The increased inflows increased the supply of the greenback in the market, adding gains to the local unit.

The outgoing week saw positive developments on the economic front. Moody’s Investors Services upgraded Pakistan's outlook from negative to stable along with improving rating of five key banks. “The change in the outlook to stable is driven by expectations that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility.”

“Such developments reduce external vulnerability risks, although foreign exchange reserve buffers remains low and will take time to rebuild,” the rating agency said.

The Asian Development Bank approved an emergency loan of $1 billion for Pakistan to provide immediate support to the country’s finances and help strengthen a slumping economy.

Moreover, the country received £190 million from a settlement between Malik Riaz and the British government during the week.

The foreign exchange reserves held by the State Bank of Pakistan rose $431 million to $9.112 billion during the week ended November 29.

The increase in the foreign exchange reserves was due to reduction in the foreign exchange swaps and forward liabilities of the central bank.

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