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Thursday March 28, 2024

Rupee may remain range-bound

By Our Correspondent
April 25, 2021

KARACHI: The rupee, which has been under pressure lately, is expected to trade range-bound next week, though traders said a slight depreciation is possible.

The fear of economic slowdown due to the resurgence in the coronavirus cases across the country may hurt the sentiment on the rupee, as the government has hinted at closing down major cities if the outbreak gets out of control.

“We are anticipating the demand from importers to remain elevated, especially as we are near the end of the month. The supplies are expected to be not enough to match the demand. Overall the rupee is likely to be rangebound with chances of slight weakness,” a foreign exchange trader said.

The rupee lost 94 paisas, or 0.61 percent, to close at 153.87 against the dollar in the outgoing week.

“Despite worsening macros, next week the rupee will be more or less range-bound, unless we witness a sharp weakness in regional currencies or an adverse publication of REER [Real Effective Exchange Rate] numbers,” Tresmark said in a weekly report on Saturday.

The COVID-19 made its presence felt on the rupee, which declined sharply, trading as low as 154.15 before pairing some losses, as exporters sold forwards into the rally.

While the pandemic helped fuel this rally, traders claimed that a large transaction related to the coupon payment of a Eurodollar bond was the main reason for the spike.

Market volatility has been consistent with regional markets, which have become more volatile due to a sharp increase in daily cases. In India, the rupee traded above the 75/$ level after being range-bound at the 72-level just a couple of weeks ago,” it said.

The current account recorded a deficit of $47 million in March, which makes this the fourth month in a row. Foreign exchange reserves have also declined marginally.

Pakistan’s foreign exchange reserves slightly fell to $23.212 billion in the week ended April 16 from $23.220 billion a week ago.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased $63 million to $16.043 billion.

“The biggest casualty was the bond market where yields fell materially across-the-board, the report said, adding that traders who were earlier expecting interest rates to rise, finally reversed their outlook as they realised that COVID-19-related impact may stay for months to come.”

Consequently, Pakistan was also able to raise Rs700 billion a few pips lower than earlier auctions. Analysts were expecting interest rates to remain unchanged throughout 2021.