KARACHI: Market sentiment for the Pakistani rupee improved during the outgoing week as the country received funds from the IMF and friendly countries, but importers’ dollar demand increased, traders and analysts said. The currency market is likely to trade in a range next week due to
The rupee gained against the dollar in the week as Pakistan received the first installment of $1.2 billion from the IMF a day after its board approved a nine-month bailout package.
Additionally, dollar inflows from other external sources helped strengthen the rupee against the dollar, which rose to Rs 276.46 per dollar on Thursday. On Friday, the currency gave up its gains and fell to a low close of 277.59.
Cash-strapped Pakistan has received $4.2 billion from Saudi Arabia, the United Arab Emirates and the IMF this week. As a result of the inflow of funds, foreign exchange reserves held by the State Bank of Pakistan increased from $4.5 billion in the week ended July 7 to around $9 billion currently.
“The recent inflow of $4.2 billion has greatly improved market sentiment. However, the rupee looks set to trade marginally after the central bank allowed commercial banks to open fresh letters of credit for commodity imports. has given,” said a currency dealer.
Tracemark said in a note on Saturday that the IMF’s program was one-of-a-kind, customized to meet Pakistan’s current needs, and with political pressure to reach that level. was helped.
“It shows how the US and the Gulf states view Pakistan as geographically too important and too big to fail, and how Pakistan’s forces are built on the latter’s security infrastructure.”
Since the IMF staff level agreement, Pakistan’s sovereign bonds have increased from 38 percent to 60 percent. It is important to note that the 2024 Eurobond trades at 80, the 2031 bond bid at 48. “These metrics suggest that the current IMF/Gulf bailout is a Band-Aid and Pakistan still faces high default risk in the coming years unless reforms are made. has been launched on a war footing,” he noted.
Although Pakistan’s economic growth looks set to surpass the IMF’s estimate of 2.5 percent, its inflation rate of 25 percent for the current fiscal year is not good news.
According to Tracemark, if inflation remains high, interest rates are unlikely to come down anytime soon.
The 1 and 3 month trading has seen a rise in swap points with sentiment around Rs 4 and 10 respectively … converting at an annualized rate of around 15%.
While higher swaps suggest an improvement in liquidity, between Delta and Karachi Interbank Offered Rate (where the swap should take place) 22 percent shows that the dollar is still in high demand.
It said, “While the better reserves are cheering on the $6 billion estimate of the payments backlog (imports, profit repatriation, etc.), will not allow the rupee to strengthen beyond its current levels. “
“At the same time, the impact of higher interest rates and a weaker rupee on inflation will continue to support the rupee. Along with this, we reiterate our earlier views that unless the care-tech step-up becomes a step-up, the rupee will remain range-bound and will remain anchored around the level of 282-285.According to Tracemark, there is still no significant forward selling by exporters.
