How will the Pakistani rupee perform next week?
- Traders expect the Pakistani diaspora to send funds before Eid ul Azha.
- In the interbank market, the rupee fell Rs0.99% against the dollar this week.
- The rupee has behaved fairly cautiously this week despite importers and businesses showing strong demand for the US dollar.
KARACHI: The Pakistani rupee is expected to remain within a range against the US dollar during next week’s trading with cash inflows ahead of Eid-ul-Azha, which traders say will balance demand from importers.
“We expect the Pakistani diaspora to send funds home to buy sacrificial animals, which will bring some relief to the rupee,” said a currency trader at a major bank. The news.
The trader, according to the publication, said he expected an increase in remittances would likely offset the impact of rising oil prices and keep the local unit stable during the week to come.
The increase in the country’s foreign exchange reserves – due to securing a billion dollar loan from China and $ 400 million from the World Bank – may have helped ease some of the burdens. market, according to traders.
The 160 / dollar exchange rate appears to be a critical resistance level and most market participants say the central bank will strongly defend this figure.
A recent statement by the Governor of the State Bank of Pakistan (SBP) that negotiations with the International Monetary Fund on the sixth review of its $ 6 billion loan program were going smoothly and could also strengthen the sentiment of the market.
The direction of the Rupee may be hazy but it looks like the SBP will avoid any surprise moves and any move will be very gradual.
In the interbank market, the rupee fell by Rs0.99 or 0.62% against the dollar this week. It closed at Rs158.18 per dollar on Monday and concluded the week ending at Rs159.17.
The rupee has behaved fairly cautiously this week, despite strong dollar demand from importers and businesses.
The postponement of import payments from the fourth quarter of fiscal 2021 and the repair of profits and dividends of multinational companies at their overseas headquarters have driven up demand for the greenback in the market, pushing the rupee under pressure.
The flight of foreign capital has also put pressure on the national currency. There has been a net exit of $ 10 million from the stock market and a $ 23 million exit from the bond market in July to date, according to data on convertible rupee special accounts.
Some traders believe that a correction in the rupee is unlikely at this point and that it could weaken to Rs 162 by the end of September as imports could continue to rise.
The rupee has lost ground in recent days due to rising import payments.
Imports increased 26% to reach $ 56.1 billion in the last fiscal year 2020-2021.
The increase in imports is attributed to the recovery in economic activity, increased imports of machinery and soaring international commodity prices.
Imports are expected to increase further during the year, with the government setting a growth target of 4.8%. However, exports are unlikely to keep pace with imports.
Exports rose 18.2% to $ 25.2 billion in July-June 2021. However, strong foreign exchange reserves and Eurobond inflows could be positive triggers for the rupee in the near term.
Pakistan’s foreign exchange reserves hit a record high of $ 24.41 billion on July 2. Central bank reserves stood at $ 17.2 billion.
Analysts expect the potential inflows from selling 5, 10 and 30-year Eurobonds into international capital markets to relieve the country’s foreign exchange reserves.
Pakistan plans to raise $ 2-3 billion through a Eurobond transaction.