Rupee likely to remain range-bound

KARACHI: Rupee traded range-bound during the week as demand for hard currency remained mostly subdued among importers on account of year end getting closer, traders said.

The rupee would expectedly hover between 159.80 and 160.30 against the dollar in the interbank market next week, they said.

“Importers and the corporate sector usually are reluctant to take fresh positions during the last week of the year, curbing the appetite for the greenback. If any demand emerges, it is likely to be outstripped by inflows available in the market,” said a foreign exchange trader at a commercial bank. The rupee rose 48 paisas to close at 160.32 versus the greenback during the four sessions of outgoing week.

Financial markets remained closed on Friday for Quaid-e-Azam Day and Christmas.

The rupee consolidated during the week due to current account surplus, debt restructuring by the Paris Club, and steady inflow in Roshan Digital account.

“Analysts, however expect the rupee to trade within 159/161 with possible retest of the 158 level in the next quarter. But most are unanimous that there will be no significant rupee strengthening,” said Tresmark in a research note.

Interest rates might be under pressure with stakeholders making a strong case for reducing rates.

While that could be beneficial, the central bank would like to keep balance and maintain status quo, it said.

Pakistan has been blessed by positive factors, including surging remittances, quicker bounce back of exports and cooperative multilateral flows. But in spite of this enabling environment on the external front, structural weaknesses were worrisome.

Fiscal deficit remains uncontrolled, poor tax collections, incoherent subsidies, lack of administrative controls, poor credit off take, and other crucial reforms were needed urgently to provide a sustainable ecosystem, said the report.

On the plus side, it seems like the International Monetary Fund was very close to continuing the Extended Fund Facility package.

This together with cooling off the FATF issue would assist Pakistan in better repackaging important reforms and generating international interest, the report added.

Pakistan’s foreign exchange reserves dropped to $20.313 billion during the week ended December 18 from $20.379 a week earlier.

Foreign reserves held by the State Bank of Pakistan decreased by $83 million to $13.216 billion on the back of the external debt repayments.