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business
Sunday Apr 25 2021
By
Web Desk

Weekly currency update: Pakistani rupee expected to stay range-bound

By
Web Desk
The local unit lost 94 paisas, or 0.61%, to close at 153.87 against the dollar in the outgoing week. AFP
  • Dealers expect the Pakistani rupee to face slight depreciation.
  • The local unit loses 94 paisas, or 0.61%, to close at 153.87 against the dollar in the outgoing week.
  • The fear of economic slowdown due to the resurgence in coronavirus cases across the country may hurt the sentiment on the rupee.


KARACHI: Dealers expect the Pakistani rupee to face slight depreciation and said that the local currency, which has been under pressure lately, will trade range-bound in the coming week, The News reported on Sunday.

The local unit lost 94 paisas, or 0.61%, to close at 153.87 against the dollar in the outgoing week.

A foreign dealer in this regard said the market is anticipating the demand from importers to remain elevated, especially 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 range bound with chances of slight weakness." he opined.

Read more: Weekly currency update: Pakistani rupee to remain stable on soft demand ahead of Ramadan

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.

The pandemic effects

The pandemic 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.

Meanwhile, Tresmark in a weekly report on Saturday: “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."

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,” Tresmark said.

Read more: Pakistan’s foreign exchange reserves hit a five-year high

Foreign reserves decline marginally

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.