Wednesday September 22, 2021

Rupee may hold steady

August 01, 2020

KARACHI: The rupee is expected to hold steady against the dollar in the coming week with the market mainly driven by matching demand and supply, traders said. “We expect rupee trading to continue around current levels, with little fluctuations, unless we see a big demand among importers and corporates,” a dealer said at a leading commercial bank.

“As most dollar buyers have already met their requirements before Eid holidays, it will limit demand for dollars. So, the local unit should be range-bound, trading in the band of 166.90 to 167.20 per dollar in sessions ahead.”

In the interbank market, the rupee lost 11 paisa in see-saw trade against the greenback during the outgoing week. The rupee ended weaker at 166.98 to the dollar on Thursday (last trading day) as importers purchased dollars to meet month-end obligations ahead of the three-day holidays.

The currency market will remain closed from July 31 to August 3 for Eidul Azha holidays. However, the inflows of $505.5 million received from the World Bank had propped up the local unit, pushing it higher at 166.45 to the dollar on Tuesday.

These multilateral inflows had a short-lived impact on rupee.

Higher debt repayments continue putting pressure on the foreign exchange reserves and balance of payments. Pakistan’s foreign exchange reserves dropped to $18.912 billion in the week ended July 24 from $19.047 billion in the previous week. The SBP’s reserves decreased by $146 million to $11.975 billion, due to government external debt repayments.

The State Bank of Pakistan in its third quarterly report for FY2020 on the state of Pakistan’s economy stated that the outlook for the external sector was reasonably comforting, with the current account expected to remain bounded.

While higher competition among competing exporters amid recovering global demand in the post-COVID-19 setting might restrict any quick recovery in exports, imports were expected to remain subdued due to low domestic demand and soft international oil prices in the coming months, it said.

While workers’ remittances might remain low as current disruptions and declining oil prices have strained economies of GCC countries, some cushion in services imports might come from restrictions on international travel.

However, multilateral inflows could grow further and make up for some weakness in global capital inflows as more funds have been pledged by various international institutions to help governments cope with their pandemic related relief efforts, the State Bank of Pakistan stated.