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

• Dealers expect Pakistani rupee to remain stable against the US dollar in the next week.
  
• Domestic currency traded in the band of Rs157.08-157.14 against the dollar this week.
  
• According to a foreign exchange dealer, the local unit is expected to follow a range-bound trading pattern for the next week.
  

KARACHI: Dealers expect the Pakistani rupee to remain stable against the US dollar in the next week, citing matching demand and supply of the greenback as the reasons for the prediction, The News reported on Sunday.

The domestic currency traded in the band of Rs157.08-157.14 against the US dollar this week.

According to a foreign exchange dealer, the local unit is expected to follow a range-bound trading pattern next week.

“Any uptick in dollar demand for import payments could easily be covered owing to the inflows available in the market.”

“Taking a cue from this week, we anticipate the local unit to trade around the current levels in the coming sessions. The next range should be Rs157 to Rs157.15 per dollar,” he added.

What are analysts predicting?

Meanwhile, analysts opined that the momentum of remittances and Roshan Digital Account inflows continued with the former clocking in at $2.26 billion in February (up 24%) and another $671 million pouring in till March 11 on the latter's account.

About $30 million also came in the Special Convertible Rupee Accounts, mostly bonds.

The rupee was almost stable and capped some higher gains it made last week, despite these inflows.

Citing a forex trader in a commercial report, Tresmark said: “Forward selling by exporters has slowed down, but more importantly, dollar liquidity in the interbank market has magically vanished.”

“It does seem like stakeholders are evaluating market acceptance at these levels, while the emerging political developments may also be playing on the mind of traders.”

Read more: Buying, selling rates of US Dollar against Pakistani rupee on March 14

While fresh data for exports is not available, analysts expect the exports to marginally drop in February.

Moreover, analysts were of the view that interest rates might not hike in the March monetary policy, as the SBP suggested, but the probability of rate hike would increase in May, where the then Covid trajectory would be vital for its outcome.

Rupee denominated government securities

Rupee-denominated government securities like T-bills and PIBs have once again become attractive to the world, as hot money inflows have paced up, and are likely to surpass outflows any day ahead.

Foreign investors sold papers worth a net of $60 million from July 1, 2020, to March 11, 2021, according to latest figures from the State Bank of Pakistan (SBP).

The breakdown shows they have invested a total of $601.21 million and sold $661.58 million short-term and long-term government papers in the period under review.

In this regard, Samiullah Tariq, head of research at Pak-Kuwait Investment Company, said: “Higher yields compared to global interest rates are one consideration. Another consideration is improved balance of payments along with improvement in the global liquidity situation which is giving confidence to international fixed-income investors.”