- Strong demand for US dollars for import payments, inflation and the widening current account deficit are putting pressure on the rupee.
- The rally in global commodity prices could put pressure on the rupee.
- “The range for the rupee is expected to be 170-71 in the coming week,” said an analyst.
Analysts said the Pakistani rupee is likely to stay in the range next week, as recent actions by the State Bank of Pakistan (SBP) have raised expectations for the currency to stabilize in the coming days.
The rupee hit its low of 170.96 before cutting losses as the continued rise in dollar demand for import payments, rising import bill, soaring commodity prices base and the widening current account deficit put pressure on the national currency.
The rupee also suffered losses due to the US dollar outflow from Pakistan to Afghanistan, creating a shortage of demand for the greenback in Pakistan.
Meanwhile, actions by the State Bank of Pakistan (SBP) eased the pressure on the rupee as it curbed unwanted outflows of foreign currency. The rupee closed at 170.53 to the dollar on Friday.
“I anticipate that we will see sluggish activity on the demand side, and the inflows are likely to balance demand for US currency from manufacturing and oil importers,” said a forex trader at a commercial bank.
However, the rise in global commodity prices could put pressure on the rupee, he added.
The world commodity index was the highest in the past 25 years.
“The range for the rupee is expected to be 170-71 in the coming week.”
Currency traders said the central bank would be concerned if the rupee breaks the 171 barrier, adding that this will lead to higher food prices, general inflation and people paying more for imports.
IMF program, remittances
Analysts said the future price of the rupee would depend on the resumption of the International Monetary Fund (IMF) program. The government wants to offer the most favorable terms under the current circumstances, as it is eager to complete the sixth review of the extended $ 6 billion facility.
High-level talks with the IMF will end next week.
However, not all the news was bad for the economy this week. Reports said money sent by Pakistani workers overseas rose 12 percent to $ 8 billion in the first quarter of the current fiscal year.
Remittances are expected to reach $ 30 billion in fiscal 2022 to become the largest source of foreign currency, analysts say.
“If the trend of the first quarter continues, Pakistani remittances could reach $ 32 billion in the current fiscal year. This contributes significantly to counter external pressure on the balance of payments, ”according to Trust Securities and Brokerage Limited.
Remittances have remained above $ 2 billion since June 2020. The central bank said it was also the seventh month in a row that money inflows averaged around $ 2.7 billion. dollars. Pakistan received record $ 29.4 billion in remittances in FY2020-21, compared to $ 23 billion in FY2019-20. The government expects remittances of $ 31 billion for this fiscal year 2021-2022.
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