Rupee to hold steady

KARACHI: Market watchers expected the rupee to hold steady or appreciate slightly next week, helped by inflows from Pakistani diaspora in the shape of remittances, and in the hope of financial assistance commitments made from multilateral institutions to help boost the country’s foreign exchange reserves.

The rupee gained significantly, breaching below 155 levels in the last trading session of the week, as the completion of second to fifth reviews of Pakistan’s $6 billion worth Extended Fund Facility by the IMF Executive Board and release of funding by other multilateral institutions that were held back till the fund’s formal approval contributed to improve investor risk

appetite.

The rupee closed at 154.59 against the dollar on Friday. It appreciated 0.88 percent on a week-on-week basis and 2.22 percent month-on-month against the greenback.

“I think we should see the rupee range-bound or strengthen a bit in the coming sessions because of strong supplies, amid surging workers’ remittances and continued higher inflows into Roshan Digital Account,” a foreign exchange dealer at a leading commercial bank said.

More dollar inflows are expected during Ramazan and Eid-ul-Fitr, which also present a positive outlook for the rupee in the next few months.

“We see 154.40 per dollar as a support level for the rupee in the coming week,” he added.

Apart from these positive triggers, traders were unanimous that the future course of the rupee would depend on the forex strategy of the central bank.

Traders believe the rally in the rupee will not diminish unless the State Bank of Pakistan steps in and starts buying dollars.

Some analysts expect the SBP’s intervention in the market sooner than later, owing to an anticipated increase in the Real Effective Exchange Rate (REER). They estimate REER to be over 100.

Analysts also fear the country’s exports may face some setbacks due to the coronavirus-related lockdown in the Europe. Moreover, Special Convertible Rupee Accounts’ flows haven’t been increased this month and they posted an outflow of $9 million.

Further, the country is likely to have debt repayments of around $3 billion by the end of this fiscal year.

This week the IMF’s board approved $500 million disbursement to Pakistan for budget support.

The World Bank (WB) on Friday signed agreements with Pakistan to provide $1.336 billion worth of assistance.

The WB approved $600 million for socio economic development through Ehsaas Programme.

Pakistan is looking to raise approximately $2 billion from international markets in coming months.

Pakistan’s foreign exchange reserves increased 1.36 percent to $20.434 billion in the week ended March 19.