Rupee to trade in narrow range next week

KARACHI: The rupee is likely to be range-bound against the dollar over next week due to increased demand for hard currency and subdued inflows.

The rupee fell by 0.22 percent or 35 paisas during the outgoing week. It closed at 158.22 per dollar on Monday, and ended the week at 157.87 in the interbank market.

The rupee appreciated 6.25 percent in the last fiscal year ended June 30.

“The domestic currency is expected to remain under pressure with demand for the dollars from the importers and the companies expected to persist, while inflows seem inadequate to meet the demand,” said a foreign exchange trader.

“The surge in the FY2021 trade deficit is likely to affect sentiment on the rupee as the sustained increase in the trade gap could pose a challenge for the government to control the external current account,” he said.

“We expect the rupee to trade in the range of 157.60 to 158.20 against the greenback in the coming sessions.”

Pakistan’s trade deficit rose by 32.9 percent in the fiscal year 2020/21 due to decline in export proceeds and higher than expected imports.

The annual trade deficit reached $30.796 billion in July-June FY2021 from $23.180 billion in the previous year.

The annual import bill rose 25.8 percent to $56.091 billion in FY2021 from $44.574 billion a year earlier.

Analysts expect the rupee to remain stable in the near term on the back of rising foreign exchange reserves.

The country’s foreign exchange reserves rose to $23.297 billion in the week ended June 25, from $23.256 billion a week earlier.

The launch of a three-tranche Eurobond deal to raise $2.5 billion, comprising tranches of five, 10 and 30 years also helped aid sentiment, supporting the local unit. The government received $5.3 billion in combined orders for the bonds.

The speculative elements had been removed from the foreign exchange markets owing to the vigilant and the supervisory role of the central bank, analysts said.

The limited outflows due to subdued international traveling amid Covid-19 restrictions and remittances coming through official channels also supported the remittances as well as currency.