Rupee likely to stay range-bound

KARACHI: The rupee is seen range-bound against the dollar next week driven by matching demand and supply of the hard currency, traders said.

“We expect the rupee trading to continue around the current levels, with little fluctuations, unless we witness a big demand among importers and corporates,” a dealer at a leading commercial bank said.

“The local unit should be range-bound, trading in the band of 159.80 to 160.30 per dollar in [the] sessions ahead.”

In the interbank market, the rupee weakened 71 paisas to close the week at 160.13 against the greenback during the outgoing week.

However, some traders expect the local unit to come under pressure due to year-end importers’ demand and higher debt repayments.

Importers have started buying dollars, amid fear that the local currency could depreciate in the coming months. Foreign debt repayments are also expected to put pressure on the currency and contribute to the strain on foreign exchange reserves, they said.

Pakistan’s foreign exchange reserves fell $311 million, or 1.5 percent, to $20.241 billion as of November 27.

The forex reserves held by the State Bank of Pakistan (SBP) dropped $305 million to $13.110 billion due to external debt repayments.

“The rupee seems to be seesawed unless the macroeconomic fundamentals offer clarity on the direction of the exchange rate,” another dealer said. The rupee may face downside pressure if the macroeconomic fundamentals deteriorate, owing to the spread of the coronavirus infections in the country.

“The trading range for the rupee for this month should be 159-161.”

The constant increase in the remittances, healthy exports, higher foreign exchange reserves and the current account surplus can help trigger the rupee’s strength against the dollar in the near-term, according to dealers.

“The rupee snapped recent losses to stabilise at 160 level and we anticipate the rupee to hover at this psychological level at least in the next session,” a foreign exchange dealer said.

“However, we expect it to come under pressure again due to year-end importers’ demand and higher debt repayments.”

Latest data issued by the Pakistan Bureau of Statistics showed that exports increased 7.67 percent to $2.161 billion in November from $2.007 billion in the same month of the last fiscal year.

Exports continued to recover despite resurgence in coronavirus cases in Pakistan and globally. Exports increased 2.11 percent to $9.737 billion in July-November FY2021.

Remittances from Pakistani workers abroad rose 26.5 percent to $9.431 billion in the four months of the current fiscal year.

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 such as 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.