Rupee may stay intact

KARACHI: The rupee is seen trading little changed in the coming week, as appetite for hard currency remains mostly subdued among importers, while inflows from remittances and Roshan Digital Account could also support the local unit, traders said.

The rupee is expected to hover at a support level of 160 in the interbank market next week, according to traders.

“Dollar demand has been outstripped by inflows and the trend is likely to continue in the sessions ahead,” a foreign exchange trader at a commercial bank said.

Remittances flows surged 26.9 percent to $11.7 billion in the first five months of the current fiscal year.

Remittances from overseas Pakistanis into Roshan Digital Account have reached $139.4 million, with $81 million invested in Naya Pakistan certificates so far.

This week the rupee traded in a range-bound manner against the dollar, despite inflows, both from remittances and Roshan Digital Account, exceeded expectations.

The rupee gained 14 paisas to close the week at 160.14 against the dollar during the outgoing week.

Reserves increased $161 million to $20.402 billion as of December 4, 2020 and have been consistently above the $20 billion mark for the second consecutive week.

“In all likeliness, the central bank is mopping up excess dollar liquidity to keep the rupee stable,” according to Tresmark in a client note.

“The currency if left unmonitored may strengthen to a point where not only exporters are adversely impacted, but may also give the importers a springboard to accelerate imports,” it warned.

Some traders anticipate the domestic currency to consolidate its gains against the greenback in the coming sessions.

“We believe the rupee now poised to trade at 159 level to the dollar,” another dealer said. The State Bank of Pakistan’s (SBP) provisional Real Effective Exchange Rate (REER) for the month of October 2020 came out at 97.11, almost three percent higher than the preceding month, but still comfortably below 100.

The Special Convertible Rupee Account (SCRA) also saw marginal outflows with most of the outflow from equities ($255 million) replaced by inflows from Pakistan Investment Bonds ($309 million) for the period since July 1.

Overall, the view on the rupee is bullish

because of a persistent increase in remittances and foreign exchange reserves, a dealer said.

“We expect the rupee to move in the range of 159.80 and 160.20 in the coming sessions of the upcoming week,” he added.

A report on Pakistan Investment Outlook 2021 issued by the Taurus Securities Limited sees overall economic recovery in the country. It also expected the economy to grow at 1.9 percent this fiscal year.

The report also expects improving macroeconomics, including stable external outlook in FY2021.