Rupee likely to appreciate a bit

KARACHI: The rupee could strengthen marginally against the dollar next week helped by increased dollar inflows from Pakistani expatriates in the Roshan Digital Account (RDA) and positive sentiments regarding the country’s economy.

Markets expected that the rupee would appreciate materially following the announcement of the Financial Action Task Force (FATF) that it would keep Pakistan on its grey list until June 2021.

However, the dollar found strong bids

at 158.10 and later the rupee which had started the trade at 158.45, closed at 158.10/dollar on Friday. The local unit gained around Re1 or 0.60 percent during the outgoing week.

FATF appreciated Pakistan for the

significant progress made on the entire

action plan. Islamabad largely addressed

24 of the 27 action items under the

FATF.

“The outlook is that we see the rupee to appreciate slightly in the near-term view from next week to the end of next month (March) due to better than expected RDA inflows, increasing remittances and positive economic developments,” said a dealer at one commercial bank.

“There is excess supply and falling demand for the dollar in the market,” he added. “We expect the rupee to trade below 158 levels in the coming week. For the next month, the trading range is expected to be 157 to 157.50.”

Exporters were nervous by a steady slide in the value of dollar, said a Tresmark a note to its client.

“Exporters in the textile industry (the backbone of the export segment) are already battered with sharp increase in cotton and yarn prices and a surge in utilities,” it said.

The central bank is likely to step in to mop up excess dollar liquidity, Tresmark said, and added that it has done that before around the same 158 level, which was why analysts expected it would do so again.

RDA scheme has received $554 million inflows from non-resident Pakistanis in five months and 92,500 accounts have been opened from 97 countries around the world so far.

The current account deficit narrowed 55 percent year-on-year to $229 million in January.

The current account recorded a surplus of $912 million in the seven months of the current fiscal year (July to January), compared with the deficit of $2.54 billion in the same period of last fiscal year.

Remittances from overseas Pakistani workers rose 24 percent to $16.5 billion in seven months of this fiscal year.

Bonds markets in Pakistan consolidated showing marginal increase in both bonds as well as forward swap rates.

Most analysts anticipate heightened volatility in all asset classes in the next few weeks as inflation and QE polarise traders from both camps.