Currency update: Pakistani rupee likely to remain range-bound next week against US dollar

• The rupee is expected to remain range-bound against the US dollar next week
  
• In the out-going week, the Pakistani rupee rose to 0.43%, or 70 paisas, against the dollar
  
• The rupee had closed at 160.10 on Friday

With an improvement in inflows lending support to the local unit, the rupee is expected to remain range-bound against the US dollar next week supported by subdued demand for hard currency.

According to a news report published in The News, dealers have opined that the amount of $10 million raised by the Asian Development Bank (ADB) in the second issue of the local currency Karakoram bonds from foreign investors helped promote positive sentiment in the foreign exchange market.

The ADB had already endorsed a new five-year country partnership strategy to loan an estimated $10 billion to Pakistan for five years.

“We expect the rupee to trade within its established range of 160 to 160.50 per dollar in the interbank market in the coming sessions,” a currency dealer said.

Read more: Currency update: US dollar rates against rupee on January 31

In the out-going week, the Pakistani Rupee rose to 0.43%, or 70 paisas, against the dollar. However, it closed at Rs 160.10 on Friday.

With remittances rising 24.9% to $14.2 billion in the first six months of the current fiscal year, and in December $2.4 billion was received, the domestic currency managed to post moderate gains because of strong remittances from overseas Pakistani workers, healthy exports, and a current account surplus.

Analysts have said the rupee looks to remain stable in the near-term, but the future direction of the currency will gravitate towards its historic depreciation of an estimated 6% in the long run.

In the short- to medium-term, traders will keep a close eye on the Real Effective Exchange Rate (REER), the publication underscored.

Meanwhile, the State Bank of Pakistan, in its monetary policy update last week, announced that the persistent improvement in the current account position and improving sentiment led to a mild appreciation in the rupee since the last meeting and further strengthened external buffers.

The SBP’s foreign exchange reserves rose to $13 billion, their highest level since December 2017.

Keeping in view the data available so far, the central bank said that the outlook for the external sector has improved further and the current account deficit for FY21 is now projected to remain below 1% of gross domestic product.