Rupee likely to test 280/dollar level in current month

A bank employee counts Pakistani rupee notes at a bank in Peshawar, on August 22, 2023. — Reuters

KARACHI: The rupee is anticipated to maintain its range-bound trading pattern, but it may test the 280 per dollar level this month, according to a report released on Saturday.

In the interbank market this week, the rupee closed at 278.83 against the dollar on Monday. However, it subsequently fell, ending the session at 278.97 on Thursday. The local currency staged a recovery and finished at 278.94 on Friday.

A report from Tresmark indicates that both the Indian and Bangladeshi currencies have depreciated. Pakistan’s foreign exchange reserves are on a downward trend, and imports for January are projected to exceed the $5 billion mark. Outflows from special convertible rupee accounts, such as bonds and equities, surpassed $58 million in the first 17 days of this year. Premiums have also increased, which could indicate forward selling activity from exporters.

While the rupee is expected to continue its range-bound movement, it is anticipated to test the 280 level this month. The report forecasts the rupee may breach the 278 level and trade at approximately 279.25 against the dollar in the coming week, with a possibility of weakening to 281 in the first quarter of 2025.

Pakistan’s foreign reserves held by the central bank fell by $76 million to $11.372 billion as of January 24 amid low financial inflows and high external debt repayments.

The country’s forex reserves decreased by $137 million to $16.052 billion, and the reserves of commercial banks fell by $61 million to $4.680 billion.

According to the State Bank of Pakistan (SBP), out of $26.1 billion in external debt repayments for FY25, the net amount adjusted for rollover/refinance is $10 billion, with $6.4 billion already paid. For the remainder of FY25, the net repayable amount is $3.6 billion. The expected inflows in the second half of this fiscal year from commercial banks and bilateral sources are likely to offset the outflows. As a result, there should be no pressure on forex reserves buildup. With $100 billion in short- to medium-term financing requirements, Pakistan cannot afford the risk of leaving the International Monetary Fund (IMF) programme, according to recent remarks made by Minister of State for Finance Ali Pervaiz Malik.