Pakistani rupee is likely to remain stable or weaken marginally against theUnited States dollar in this week starting from January 18 (today).
The Pakistani rupee’s outlook remains stable in the near-term givenpositive developments on the economic front, said traders.
The likelihood of a resumption of the suspended International Monetary Fund(IMF) programme, positive macroeconomic indicators, and sizeableimprovement on the external account front would back the rupee in the daysto come.
A foreign exchange trader said the local unit is expected to follow arange-bound trading pattern for the next week. “However, any uptick in theUS dollar demand for import payment, especially oil, could hamper therupee’s stability.”
Another trader said the local unit may trade on the backfoot to the dollarin the coming sessions if an expected demand for the dollars emerges in themarket and supplies diminish. “The next range should be between Rs160.25and Rs160.75,” he added.
In the outgoing week, the Pakistani rupee remained largely stable withmarginal gains in the last fourth session. It remained between Rs160 andRs160.50 through the week and gained Rs0.24 in the interbank market fromTuesday to Thursday last.
The rupee was supported by muted demand, strong inflows from export andremittance, and positive sentiment about the country’s economic outlook.
But a sudden demand for import payments during the last session limited thegains as the rupee closed at Rs160.33 on Friday last. The decline in theState Bank of Pakistan’s foreign exchange reserves affected the traders’sentiment. The central bank’s forex decreased by $12 million on January 8.
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The country’s current account posted a surplus in the five months of thecurrent fiscal year because of the market-determined exchange rate regime,increase in remittances, lower energy import bill, and subdued localdemand. Pakistan posted a surplus of $1,640 billion in July-November of thecurrent financial year to a deficit of $1,745 billion in the same periodlast fiscal year.
The encouraging industrial output numbers and stable outlook for Pakistan’seconomy, as well as the banking sector by the latest Moody’s reportpositively impacted the rupee.
The large-scale manufacturing (LSM) index grew 14.45 % in November, whilecumulatively, the index picked up 7.4% year-on-year in the five months ofthe current fiscal year. The market expects the LSM index to remain upbeatowing to accelerating manufacturing operations, improvement in aggregatedemand, and new investments.
Markets expect continued monetary easing by the State Bank of Pakistan(SBP), as they have correctly identified the second coronavirus pandemicwave as a key downside risk to growth and forecasting a 1.5% to 2.5% GDPgrowth in FY21.
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