Rupee seen stable

KARACHI: The rupee is likely to remain steady next week, owing to matching demand and supply for the greenback, traders said. The financial markets remained closed from May 22 to May 27 for Eid-ul-Fitr holidays. Traders expect a sluggish trading activity when the foreign exchange market reopens on Thursday amid dull corporate and interbank demand for the dollars.

“We expect the rupee to maintain the current levels against the dollar in the coming week with the market seeing only two sessions,” a foreign exchange dealer with a leading bank said.

“We don’t see a high demand for the dollar in the week ahead, as most companies and importers had already settled their bills before the holidays started. This is a normal development,” the dealer added.

Many dealers; however, assume some weakness in the local unit in the subsequent week, as the businesses might start activity, amid easing of coronavirus lockdown restrictions. This could put the rupee under moderate pressure.

“The rupee is expected to see another wave of depreciation against the dollar by June this year due to falling exports and remittances,” another dealer said.

Remittances to Pakistan fell 5.5 percent to $1.790 billion in April from $1.894 billion in the previous month.

The current account deficit widened to $572 million in April 2020 from $9 million in April 2019.

The current account deficit; however, narrowed 71 percent to $3.343 billion in July-April fiscal year 2020.

The forex reserves are on a declining trend due to high external debt repayments.

The central bank’s foreign exchange reserves fell 141 million to $12.129 billion as of May 15.

The country’s total liquid foreign exchange reserves declined to $18.618 billion from $18.744 billion.

During the week till Thursday, the rupee lost 55 paisas to close at 160.92 against the dollar in the interbank market.

The currency lost value against the greenback. High demand for the hard currency, lower foreign exchange reserves and negative sentiment about the country’s public finances explained the decline in the rupee value in the week under review.

The rating agency Moody’s Investors Service, in a latest report said, Pakistan is likely to see a large fiscal deficit, as economic downturn will significantly constrain the government tax receipts, while health and social spending pressures would persist, constraining debt service capacity.

Earlier in the outgoing week, sentiments were negative following the Moody’s report over the banking sector, which said it had put top five Pakistani banks under watch for possible downgrading of their long-term local and foreign deposit and credit ratings, guessing the government could default on repayment of debt to global private sector creditors, which would also weaken the banks’ ability to operate.