Rupee may stay firm

The rupee slightly gained during the outgoing week due to steady import payments, improvement in economic indicators and positive sentiment.

The local unit rose 10 paisas against the dollar in the interbank market.

On Monday, the currency closed at 155 against the greenback, compared with the previous closing of 154.96.

The rupee was range-bound, trading in the band of 154.90 and 154.94 in the remaining four sessions.

In the open market, the local currency lost 30 paisas to close at 155 to the dollar in the outgoing week.

Dealers said the rupee is likely to stay range-bound in the coming week because of strong foreign exchange reserves positions, healthy foreign inflows and improvement in the balance of payments.

The completion of first review of the country’s economic performance by the International Monetary Fund (IMF) also boosted the market sentiment.

A persistent increase in the central bank’s foreign currency reserves is expected to cushion the external current account.

Analysts expect the current account deficit to be in the range of $6 billion to $6.5 billion in the current fiscal year of 2019/20.

The country’s current account deficit fell 73 percent to $1.821 billion in July-November FY20.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) jumped to $10.892 billion as of December 13 from $9.233 billion a week ago due to multilateral and other official inflows.

Further, the decline in the swaps and forward liabilities led to the rise in the State Bank’s reserves.

The Executive Board of the International Monetary Fund (IMF) approved the second tranche of $452.4 million for Pakistan under the extended fund facility.

“Pakistan’s programme is on track and has started to bear fruits. However, risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth,” the IMF said in a statement.

“The flexible, market-determined exchange rate remains essential to cushion the economy against external shocks and rebuild reserves buffer. The current monetary stance is appropriately tight and should only be eased once disinflation is firmly entrenched.”