KARACHI: The rupee is expected to hold steady against the dollar in the week ahead, as the market players seem to be reluctant from taking fresh positions and monitor how the coronavirus surge will impact demand and supply side of the foreign exchange market, dealers said.
“The currency’s movement in the coming sessions will be significantly driven by the demand and supply position of the greenback. If the market can see low activity due to an increase in coronavirus infection cases, the demand for the greenback will be limited,” a forex dealer said.
“Though the government has taken a soft stance at the lockdown front, we have to see at what pace the businesses and the industries operate in case the infections rise further,” he added.
Last week, the rupee traded as high as 161.20 against the dollar before retreating to close the week at 159.45 in the interbank market. “We foresee stability around 159 level in the sessions to come.”
Most currency analysts agree that the range of 159 to 161 is appropriate for the rupee / dollar in the near-term given the current scenarios. However, there are some factors, which can upset the equilibrium.
Analysts believe the virus surge and how it may impact exports, remittances’ and demand to determine the future course of the exchange rate, but there are others like fiscal reforms, uninterrupted flow of liquidity, IMF and FATF could also come into play in terms of exchange rate moves.
Traders will also be closely watching the upcoming readings of the real effective exchange rate to determine the rupee’s future path.
If the surging coronavirus yield curve results in deteriorating macroeconomic fundamentals, the rupee may come under pressure and weaken against the dollar. But if industries operate continuously and export orders are not cancelled, the rupee may continue its cautious appreciation.
Pakistan’s foreign exchange reserves increased to $$20.552 billion as of November 20 from $20.085 billion a week ago. The State Bank of Pakistan’s foreign exchange reserves increased to $13.415 billion from $12.931 billion.
Roshan Digital Accounts (RDAs) are also gaining good response from the overseas Pakistanis, providing support to the local unit.
Expatriates are depositing around $2 million daily in RDAs with approximately 1,200 accounts being opened on weekends. The initiative has received $100 million since its launch, according to the State Bank of Pakistan.
The International Monetary Fund is likely to resume its extended fund facility programme with Pakistan.
A currency expert said, "We expect the rupee to remain at 159 level versus the greenback in the coming days.” “We don’t see any payment pressure on the currency in the sessions ahead. The inflows available in the market will help meet the dollar demand from importers and the corporate sector.”
Dealers said strong dollar inflows, healthy foreign exchange reserves and increased remittances would help lend support to the local unit.
Moreover, sentiments are also positive due to the government’s decision not to shut down businesses and industrial operations, amid the second wave of the coronavirus pandemic.
