KARACHI: The rupee is likely to remain range-bound against the dollar next week aided by decreased demand for the hard currency from importers, with increasing inflows from exports and remittances, and Roshan Digital Account also supported the domestic currency.
“We expect the rupee to trade within 159.80 to 160.30 range in the coming week,” a foreign exchange trader said.
In the interbank market, the rupee remained stable, closing the week at 160.17 versus the greenback. It lost 19 paisas during the outgoing week.
The rupee has been supported by positive data on exports and remittances, while Roshan Digital Account related inflows also came into play to keep the local unit stable against the dollar.
Remittances to Pakistan surged 24.9 percent to $14.2 billion in the six months of the current fiscal year.
The foreign exchange reserves rose to $20.512 billion in the week ended December 31, 2020 from $20.254 billion a week ago.
The forex reserves held by the State Bank of Pakistan increased to $13.412 billion from $13.150 billion.
Exports increased 18.31 percent to $2.352 billion in December 2020 from $1.988 billion a year ago.
The United Kingdom went under a severe lockdown and traders braced themselves for further lockdowns in the European Union region.
When that didn’t happen, the dollar eased, not only against the rupee, but against most major currencies.
The dollar also found a bid and strengthened, as months of political uncertainty finally came to an end and Joe Biden was certified as Presidential-elect.
Analysts said the current Real Effective Exchange Rate (REER) hinted at a stable rupee this year.
Pakistan’s currency shows undervaluation against a basket of currencies, looking at the REER index of 97.1128.
“We see FX reserves improving to $18.5 billion level by the end of FY21. This would mean an average monthly
import cover well over four months for the country, indicating stability in the currency going forward, as well,” said an analyst at BMA Capital in a report titled Pakistan Investment Strategy Gather your energies for 2021.
Going forward, resumption of the IMF EFF programme will unlock further inflows for the country during the rest of FY21, it said.
Besides, successful transition towards market-based exchange rate regime and overall weakening of the greenback internationally has also worked in favour of the country with the rupee appreciating by 5 percent since its all-time lows back in August 2020. The report expects the rupee to stay near 160 against the dollar till December 2021.
Source: The News