- Analysts expect the rupee to break through the 280-rupee level.
- In the interbank market, the US dollar ended at 286.76 rupees.
- Rupee may face minor resistance near 275 levels.
KARACHI: The Pakistani rupee weakens on expectations that the US dollar will fall below Rs 280 in the next few days on the possibility of receiving the next International Monetary Fund (IMF) tranche, improving balance of payments and government action against illegal dollars. It is rising day by day. Trade increases investor confidence.
In the interbank market, the dollar ended at 286.76 rupees. The rupee continued its upward trajectory on Friday at Rs 282.69, rising 1.4%.
The rupee is expected to break through the 280-rupee level and may only face slight resistance around 275 rupees, according to analysts at financial services platform Tresmark.
“The 275 level is simply a ‘target-based’ level and some level of consolidation at that level should be acceptable to everyone,” Tresmark said in a note.
The rupee will appreciate due to many factors. For example, the IMF appears to be moving towards approving another tranche that will give wings to the rupee. The closure of Afghanistan’s borders has particularly reduced gold smuggling, which was a major means of wealth transfer. The current account balance is expected to be in surplus. And remittances are expected to come as a pleasant surprise, the paper said.
It added that the measures taken by the government to stop abuse of Afghanistan Transit Trade (ATT) and further fall in oil prices will be very beneficial for the balance of payments and support the rupee.
“So, while the rupee appears to be heading towards ‘stronger for the long term’, the two key risks are political turmoil and IMF acceptance. Both of the things we are evaluating are currently under control. ”
Pakistan’s latest trade deficit statistics revealed a positive trend. This improvement and increased remittances raise the prospect of a potential current account surplus. This development could act as an offset to the current account deficit observed in the previous months of July and August.
The country’s trade gap in the first quarter of this fiscal year (July-September) was $5.3 billion, down 42% from the same period last year.
The current account deficit in August was $160 million, down 79% from the same month last year. The current account deficit fell by 54% to $935 million in the first two months of fiscal 2024. The reduction in the deficit is due to a decrease in imports.
In July, the IMF approved a nine-month bailout package totaling $3 billion for Pakistan.
The country received $1.2 billion from the IMF in the first round of the standby agreement in July, and a second review of the loan program is scheduled for November.
The rupee has depreciated by 6% against the dollar since the caretaker government took office in August.
Thereafter, the rupee appreciated by 8% from 307 rupees to 282 rupees in five weeks, especially as a result of steps taken by the government and the State Bank of Pakistan to curb currency smuggling, hoarding and speculation in the open market. Additionally, the premium over open market bank rates has fallen to 0.1% from a peak of 7.4% on September 1st.
