Rupee may stay stable

KARACHI: The rupee is likely to remain stable against the dollar in the coming week, helped by a slowdown in the demand for the hard currency and improved inflows from remittances.

“We are seeing a slight demand for the dollars in the currency market mostly from oil importers. We expect remittances to add up dollars in the market. So, the rupee looks to appreciate slightly. However, if there’s any abrupt demand from the importers and the corporate sector, the rupee will remain range-bound,” a trader at a commercial bank said.

The local currency gained 22 paisas to close at 163.84 against the dollar during the outgoing week in the interbank market.

Some traders believe if the interbank currency market is surplus in dollars, the rupee will remain stronger. The rupee can’t achieve equilibrium until the State Bank of Pakistan (SBP) intervenes to mop up the excess liquidity.

However, some traders are of the opinion the dollar has weakened more than what they expected and should rise any time, any day.

The rupee continued to gain grounds against the greenback this week. Apart from insignificant dollar demand, analysts attribute the current spell of the currency appreciation to the inflows coming from the overseas Pakistanis under the head of Roshan Digital Account Scheme. However, there is no clue from the data to substantiate this assumption.

The dollar demand remained low due to calm in the oil payments. A few importers came to the market to buy dollars for meeting their payment obligations.

The inflows of $300 million received from the Asian Development Bank also supported the domestic currency.

The local unit continued to go upward, despite a two-week consecutive decline in the country’s foreign exchange reserves.

However, traders’ sentiment was hurt by the recent revelations of the World Bank report, warning Pakistan about external financing risks that could be compounded by difficulties in rolling-over bilateral debt from non-traditional donors and tighter international financing conditions.

The report said there are considerable downside risks to the outlook of Pakistan’s economy, with the most significant being a possible resurgence of the coronavirus, triggering a new wave of global and / or domestic lockdowns and further delaying the implementation of critical structural reforms.

The outlook is that of stability for the rupee or a slight appreciation further, a dealer said.

Data issued by the State Bank of Pakistan showed that the country’s foreign exchange reserves fell $184 million to $19.351 billion as of October 2. The foreign exchange reserves held by the State Bank of Pakistan (SBP) dropped $205 million to $12.154 billion. The decline in the reserves is due to the external debt repayments.

Trade deficit was also higher-than-expected, rising 37.4 percent to $2.39 billion in September from $1.74 billion in August.

Inflation is also on the rise, as it went up to 9 percent in September from 8.2 percent in the previous month.