Saturday, April 22, 2023

Rupee expected to hold steady against dollar after Eid break

Currency appreciates in interbank market as overseas Pakistanis send money home before Eid

A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, on December 3, 2018. — Reuters
A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, on December 3, 2018. — Reuters

  • Rupee appreciates as overseas Pakistanis send money home before Eid.
  • Rupee closes week at 283.47 compared to Monday's finish of 284.71.
  • “[Currency] isn’t likely to win big against dollar after Eid," delaer says.

KARACHI: The rupee is expected to remain range-bound against the dollar following the Eid holidays, as importers and companies are likely to increase demand for the greenback with the resumption of business activities, The News reported Saturday.

During the outgoing week, the currency appreciated in the interbank market as Pakistanis who work overseas sent more money home in remittances before Eid.

As a result, the value of the rupee increased. The local unit ended at 284.71 per dollar on Monday and finished at 283.47 on Thursday.

“The rupee isn’t likely to win big against the dollar after Eid, as business activities will return to normal, and demands from importers and companies for the dollars will increase,” a currency dealer said.

Due to Eid ul Fitr, the foreign exchange market will remain closed from April 21–25. Foreign exchange reserves held by the State Bank of Pakistan (SBP) rose by $394 million to $4.432 billion in the week ending April 14.

The reserves held by the SBP hardly cover one month's worth of imports.

The central bank ascribed an increase in reserves to the receipt of a $300 million commercial loan. Pakistan posted a current account surplus of $654 million in March against a deficit of $36 million in the previous month.

The nation's current account deficit for the first nine months (July through March) of the current fiscal year was $3.4 billion, which was 74% lower than the $13 billion deficit for the same period last year.

Reduced pressure on the external current account has been made possible by a weaker currency, import limitations, and limits on the availability of foreign exchange, as well as fiscal tightening and higher interest rates.

The country waits for the International Monetary Fund (IMF) to revive a $6.5 billion bailout package. The IMF wants $6 billion in commitments from friendly countries and multilateral and bilateral lenders to fill the shortfall in external funding.

The United Arab Emirates has committed $1 billion to Pakistan in financial support after Saudi Arabia committed $2 billion. However, the global lender requires Pakistan further funding assurances to secure a bailout.

Although foreign exchange reserves are improving, they nevertheless mean nothing in the face of significant repayments of foreign debt. Pakistan has to make around $3 billion in external debt repayments by June. Financing assurances of $3 billion are yet to be arranged in order for IMF staff-level agreement to conclude and then the Executive Board approval, according to analysts.