Rupee expected to trade range-bound against dollar in coming week

Local currency witnesses range-bound week in interbank market as it closed 278.20 on Friday

By
Our Correspondent
The Pakistani rupee strengthened further against the US dollar, appreciating 0.21% in the inter-bank market on Friday, May 26, 2023. — PPI 
  • Rupee unlikely to see major depreciation against dollar. 
  • Local currency closes week at 278.20 against greenback. 
  • Pakistan had 3 consecutive weeks of highly positive news.

KARACHI: Despite an expected increase in the fiscal year-end seasonal imports, the Pakistani rupee is unlikely to see major depreciation against the dollar in the coming week, The News reported Sunday. 

The local currency witnessed a range-bound week in the interbank market as it closed at 278.36 on Monday but made minor gains and closed at 278.20 on Friday against the greenback. 

According to a Tresmark report, the interbank currency market is liquid with dollars due to record-high remittances and a surge in foreign buying of treasury bills.

“The ‘lower than expected inflation reading’ (implying a rate cut) did little to weaken the rupee. Thus, we expect the rupee to remain range-bound even after Monday’s monetary policy decision,” it said.

“There is a slight pickup in import activity which will only get stronger post budget (expected to be announced on June 12),” it added.

“After that, year-end payments and seasonal pick up in imports will put pressure on the rupee, however, traders are not expecting any material depreciation,” said the report.

According to State Bank of Pakistan (SBP) data, Pakistan received a net inflow of $75.5 million into T-bills through special convertible rupee accounts in May (up until May 17). 

So far, in this fiscal year, these net inflows have totalled around $232 million. Experts predict that the momentum in foreign inflows into government securities will persist because of the Pakistani rupee’s stability and expectations for the new International Monetary Fund (IMF) loan programme.

The Tresmark report stated that Pakistan has had three consecutive weeks of highly positive news. In April, the country recorded a current account surplus of $491 million. In May, it reported an inflation rate of 11.8%, which was approximately 200 basis points (bps) better than market expectations.

Additionally, SBP data revealed that remittances from Pakistani citizens working abroad reached an all-time high of $3.2 billion in May. The surge in remittances could potentially result in a current account surplus of around $700 million for May.

Analysts and traders are, however, raising doubts about the government’s intentions on taxation, fiscal management, and the fight against corruption as the next fiscal year’s budget and the IMF programme approach. 

As a result, bonds crept up slightly last week and the stock market dropped more than 2,000 points.