KARACHI: The rupee is likely to bounce back next week on expected inflows from the Asian Infrastructure Investment Bank (AIIB) and a key interest rate hike by the State Bank of Pakistan as foreign exchange market participants. , JEE News reported on Sunday.
During the outgoing week, the rupee closed on a weaker note and depreciated by 0.12 percent against the greenback. It ended at 223.66 per dollar on Monday and 223.94 on Friday in the interbank market.
To control high inflation, the central bank raised its benchmark interest rate by 100 basis points to 16 percent. However, according to some experts, the increase in interest rates was influenced by the International Monetary Fund (IMF).
Topline Securities CEO Muhammad Sohail said on his official Twitter handle, “Seems the State Bank is more concerned about rising inflation.”
Moreover, discussions with the IMF for the next tranche are ongoing and delayed, forcing the committee to take this step to fight inflation, Sohail added.
“There are some positive market drivers at the moment and we will see how the market reacts to these positives,” said another analyst. He said that as a result of the central bank’s confirmation that the $1 billion Eurobond payment due on December 5 will be made on December 2, concerns about the country not meeting its financial obligations on time have increased. appears to be decreasing.
“This disbursement will not have any impact on foreign reserves as funding has already been arranged,” the State Bank said at an analysts’ briefing after the monetary policy meeting on Friday. The central bank also said that an inflow of $500 million from the AIIB is most likely to arrive on Tuesday next week.
Commenting on the expected reserve position by the end of FY2023, SBP said it would largely depend on planned inflows, outflows, and rollovers. However, the current level will be much higher.
During November, $1.8 billion was repaid, mostly against commercial loans, according to the State Bank.
State Bank said that Pakistan is expecting external flows from multilateral (like World Bank, Asian Development Bank, AIIB and others), bilateral and other sources. According to Tracemark’s weekly client note, despite some positives, the rupee’s weakness does not appear to be ending soon.
“While the CAD [current account deficit] has narrowed in July-October FY 2023, the next three months are going to present a significant challenge. November, December, and January are generally import-heavy months and remittance-heavy.” With contraction and a slight drop in exports, the CAD figure for the 3 months is around $2.9 billion (revised estimate),” it said.
It noted that if the pressure on foreign exchange reserves is not eased, the rupee/dollar parity may test previous highs.
