Rupee likely to remain stable

KARACHI: The rupee is likely to remain range-bound against the dollar next week, with inflows from remittances and

Roshan Digital Account (RDA) expected to meet importers’ demand, traders said on Saturday.

“We foresee a stable rupee in the coming week helped by strong remittances and increased inflows into RDA. Higher foreign exchange reserves and persistent recovery in exports will help hold the rupee steady against the greenback,” a forex dealer with a commercial bank said.

“The rupee is seeing some consolidation after it broke 153 level on Wednesday. We think this [consolidation] will continue. The local unit is poised to retest 153 levels before we see any reversal,” he added.

The rupee started the week at 154.04 against the dollar. It broke all anticipated support levels, racing past pre-Covid levels, gaining 0.8 percent to 152.76 in a couple of days.

Traders were surprised by an abrupt fluctuation in the currency. However, the upward trend didn’t stay for long and lost the 152 level.

The rupee closed the week at 153.55/dollar. Some traders were convinced there was the central bank intervention, and also added that it was long overdue.

Analysts believe though RDA and remittances have been up, the current account has seen outflows for the last three consecutive months, said Tresmark, an application that tracks financial markets in a client note.

Reserves have gone up, but it’s all borrowed money, it added.

A $2.5 billion pick up on Eurobonds at around 7 percent would be used to repay $3 billion of maturing debt before June end. The fiscal deficit is around 8 percent of gross domestic product, while the trade deficit clocked in at a huge $3 billion. What is worrying is that GDP growth is almost stagnant (1.3 percent), it said.

Fortunately, there was some alarm in government quarters by this sudden surge. The prime minister’s new economic team has preferred a stable currency along with economic reforms.

“Traders are still looking for direction from the SBP [State Bank of Pakistan] to make their FX strategy. While some sense of intervention was seen last week, no one can predict whether this was a floor for USD/PKR or a breather,” it said.

Overseas Pakistanis deposited $212 million in RDA in March taking the total deposited amount to $806 million.

The country’s forex reserves increased 1.96 percent to $20.836 billion as of March 26.

Exports increased 7 percent to $18.669 billion in July-March FY2021.

On interest rates, traders quickly gave up hope of a rise in interest rates as COVID cases are reaching new peaks, and 10-year Pakistan Investment Bonds easing to 10.38 percent, while the vaccination programme is underway, the fresh lockdowns will force the SBP’s Monetary Policy Committee to maintain an accommodative policy for the remainder of the year.