KARACHI: Analysts told that a forex market equilibrium between demand and supply will keep Pakistani currency steady this week.
The rupee fell 0.36% in five sessions to Rs288.49 against the US dollar on Friday (August 11). It closed Monday (August 7) at Rs287.43.
After the dissolution of the national and provincial assemblies, the currency market expected to decline. But experts said there was no significant change and the rupee only weakened at the end of the week due to the long weekend, when imports spiked, and the change in interest rate forecasts.
“The forex market has ample liquidity in the interbank market. Therefore no extraordinary pressure on the rupee,” Tresmark analysts wrote.
Money management deals and missing exporters have kept swaps northward. “Remittances fell as usual, but with current account expected in surplus. Rupee expected to stay range bound with the occasional spike above 290/$,” they said.
Pakistani expatriate remittances dropped 19.3% to $2 billion in the first month of this fiscal year. The central bank’s foreign exchange reserves declined $110 million to $8.04 billion in the week ending August 4.
Tresmark said some users asked about grey market premium sustainability.
“Premium arises when buying/selling dollars is difficult and demand exceeds supply. This needs market deregulation. It said, “No devaluation will remove the premium if dollar demand is substantial.”
“Our twin country Egypt, where the premium is a whopping 20%, even though the Egyptian pound depreciated by 63% in the last year,” the company added.
Investors are concerned about the rupee’s future under the interim administration, but analysts expect a market-based approach to determine the rupee/dollar exchange rate and a 1.25% difference between the interbank and open-market rates to comply with IMF guidelines.
