Rupee likely to stay range-bound

KARACHI: The rupee is expected to remain stable against the dollar in the coming week due to matching demand and supply of the greenback, dealers said.

“The local unit is expected to follow a range-bound trading pattern for the next week. Any uptick in dollar demand for import payments could easily be covered owing to the inflows available in the market,” said a foreign exchange trader.

“Taking cue from this week, we anticipate the local unit to trade around the current levels in the coming sessions. The next range should be 157 to 157.15 per dollar,” he added. Domestic currency traded in the band of 157.08-157.14 against the dollar this week.

Analysts said the momentum of remittances and Roshan Digital Account inflows continued with the former clocking in at $2.26 billion in February (up 24 percent) and another $671 million pouring till March 11 on account of the latter.

About $30 million also came in the Special Convertible Rupee Accounts, mostly bonds.

The rupee was almost stable and capped some higher gains it made last week, despite these inflows.

“Forward selling by exporters has slowed down, but more importantly, dollar liquidity in the interbank market has magically vanished,” said Tresmark in a report, citing a forex trader in a commercial

bank, adding “it does seem like stakeholders are evaluating market acceptance at these levels, while the emerging political developments may also be playing on the mind of traders.”

While fresh data for exports is not available, analysts expect the exports to marginally drop in the month of February.

Rupee denominated government securities like T-bills and PIBs have once again become attractive to the world, as hot money inflows have paced up, and are likely to surpass outflows any day ahead.

Foreign investors sold the papers worth net $60 million from July 1, 2020 to March 11, 2021, according to the latest figures from the State Bank of Pakistan (SBP).

The breakdown shows they have

invested a total of $601.21 million and sold $661.58 million short-term and long-term government papers in the period under review.

“Higher yields compared to global interest rates are one consideration. Another consideration is improved balance of payments along with improvement in the global liquidity situation which is giving confidence to international fixed income investors,” said Samiullah Tariq, head of research at Pak-Kuwait Investment Company. “So I think the inflow is dependent on both of these considerations.”

Analysts were of the view that interest rates might not hike in the March monetary policy, as the SBP suggested, but probability of rate hike would increase in May, where the then Covid trajectory would be vital for its outcome.