Rupee seen stable next week

KARACHI: The rupee is expected to remain stable against the dollar next week with the hard currency supplies from remittances and export proceeds matching the demand, traders said on Saturday.

The sentiment on the rupee is likely to be bullish after the unveiling of a pro-growth and high-spending 2021/22 budget.

“We see the rupee to remain stable next week, supported by the foreign currency reserves, moderate dollar demand from importers and inflows from remittances, as well as exporters,” a trader in a commercial bank said.

“We believe the demand and supply of the dollars will almost match. However, if the outflows have continued to be high and inflows inadequate, then the local unit will lose the ground,” he added.

The budget is expected to be well-received by the markets due to its focus on growth, no new taxes on the salaried class and financial inclusion.

“The budget has positive implications for the rupee. A number of announcements, including the increasing target for the remittances from the overseas Pakistani workers is a rupee positive,” another trader said.

One of the key priorities of the government in the latest budget is to facilitate expatriate remittances and savings through the Roshan Digital Account, Pakistan Remittances Initiatives and other schemes.

The government’s target for the workers remittances is $31.5 billion for the fiscal year, starting July 1, 2021, compared with $29 billion estimated for FY2021.

Remittances from Pakistani workers abroad rose 33.5 percent to $2.5 billion in May. These inflows surged 29.4 percent to $26.7 billion in 11 months of this fiscal year.

The rupee saw a volatile session, falling 0.27 percent versus the greenback during the outgoing week. It opened the week at 155.31, closing lower at 155.92 on Thursday. Good dollar inflows and respite in the import payments pressure helped the local currency to close slightly higher at 155.74 against the dollar on Friday.

Analysts expect the rupee to hover at 157/dollar by the end of the current fiscal year. The domestic currency could reach 166 level in the upcoming fiscal year.

The Federal Budget 2021/22 is a growth-centric budget with the main focus on sustainable economic growth, pro-poor initiatives and social safety nets.

The government aims at mitigating the impact of the Covid-19 pandemic and to continue with its stimulus package. It also aims at reducing inflation with price control and monitoring.

The government also looks to mobilise revenue without new taxes and increased development spending for more job creation.

Currency experts believed with the ease in the restrictions related to the coronavirus pandemic, the domestic demand would rise, which would increase the pressure for imported goods. This may increase the demand for the foreign currency.

Meanwhile, the local currency lost 43 paisas against the dollar during the week June 7 to 11, 2021.