KARACHI: Traders believe that the Pakistani rupee is likely to remain firm against the dollar in the coming week on the matching demand and supply of the greenback in the currency market, reports said on Sunday.
During the outgoing week, the local currency stayed stable. It started the week by ending at 223.95 per dollar in the interbank market on Monday and closed at 223.69 to the dollar on Friday.
“As the inflows and outflows appear to be equal in the market, we anticipate the rupee to maintain its firming tone in the sessions ahead,” said a foreign exchange trader.
Despite some encouraging developments in the week, investors would continue to be anxious about the uncertainty surrounding the International Monetary Fund’s (IMF) 9th review of the bailout package, the trader added.
On Friday, Saudi Arabia extended the term of $3 billion it had deposited into Pakistan’s foreign reserves. Moreover, the government made the payment for $1 billion bond, avoiding a risk of near-term default. However, concerns remain about the country’s ability to pay its long-term debt.
The forex market is wondering how the rupee consolidated even though real effective exchange rate (REER) deteriorated from 90 to 100 in October.
“The answer to this can be found in how SBP is scrutinizing the opening of LCs [letters of credit] and retirement of existing import commitments,” said Tresmark in a weekly note.
“Banks are encouraged to only settle import amounts, which match the bank’s export amounts. Everything else is kicked down the road. By managing the demand and supply of banks, equilibrium in the interbank market is being maintained,” it said.
However, debt servicing and repayments were chipping away the forex reserves, it added.
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