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January 12, 2020

Rupee seen volatile


January 12, 2020

The rupee / dollar parity remained volatile during the outgoing week, amid political tensions between the United States and Iran; following the US assassination of a top Iranian general.

In the interbank market, the rupee broke the level of 155/dollar on Tuesday and Wednesday, but settled at 154.83 on Friday.

In the open market, the rupee traded in the band of 155.30 and 155.80 against the greenback.

Yaqoob Abubakar from Tresmark, an application that tracks financial markets, said the rupee / dollar parity saw some fluctuations due to rising geopolitical risks.

“The week closes on a positive note with the increase in forex reserves by $3.4 million and some adjustment between the US and Iran,” he said.

Abubakar foresees the rupee to remain volatile in the coming sessions, but to maintain the level of 154.80 to 155.10 against the dollar.

Some dealers don’t see any immediate payment pressure on the local unit.

Higher foreign exchange reserves and improvement in the current account balance are expected to keep the rupee stable at the current levels, they said.

Global markets have recovered after the US has only announced economic sanctions on Iran instead of any military response. This has eased concerns over the US-Iran war chances.

The central bank’s foreign currency reserves stood at $11.503 billion as of January 3, compared with $11.489 billion in the previous week.

Dealers expect foreign financial inflows to remain high due to stable currency and improved current account balance.

The State Bank of Pakistan (SBP), in its first quarterly report published on Monday, presented a bright outlook for the current account balance in the current fiscal year.

The current account deficit is expected to be at 1.5–2.5 percent of GDP in FY20 because of contraction in imports, it said.

The current account deficit narrowed 73 percent to $1.821 billion in July-November FY20.

Remittances from Pakistani workers abroad increased 3.31 percent to $11.394 billion in the first six months of the current fiscal year of 2019/20, the SBP’s data showed on Saturday.