KARACHI: The rupee is expected to trade in range in the coming week, however, it may weaken slightly in the coming days due to the current negative sentiment in the market, JEE News reported on Sunday, quoting a dealer. .
During the outgoing week, the local currency closed at 224.65 against the greenback and ended at 224.94 on Friday. The rupee fell by 0.12% during the week.
“Since the central bank is taking administrative measures to curb imports, the supply and demand of US dollars in the interbank market is roughly equal. Banks are urged to settle only import payments that are equal to their export payments.” Be equal,” said the currency dealer.
“However, lack of external financing is likely to impact investor sentiment. In light of this, we expect the rupee to trade in a narrow range with a weak bias during the coming week.
The market has not heard anything about financial aid to Pakistan from friendly countries this week. Even the $1.2 billion refinance that was supposed to be refinanced from Chinese commercial banks did not materialize.
According to a half-hearted statement by the International Monetary Fund (IMF), progress in the talks was only meant to calm markets.
However, a sharp reduction in the current account deficit provided some support to falling foreign reserves. Pakistan’s current account deficit narrowed 86 percent year-on-year to $276 million in November.
The current account deficit more than halved to $3.1 billion in July-November fiscal 2023 from $7.2 billion in the same period last year. The State Bank of Pakistan said this was mainly due to a decline in imports while exports remained stable.
The State Bank’s foreign exchange reserves have dwindled to $6.7 billion, barely enough to cover one month’s worth of imports. According to analysts, the central bank’s administrative measures to reduce imports may not be sustainable for long.
SBP is already feeling the heat from concerned banks for resolving LCs (Letters of Credit). Many industries are headed for a complete standstill resulting in huge unemployment,” Tracemark said in a weekly note.
“At the same time, the IMF is also pushing to use devaluations rather than administrative measures to reduce imports. However, given past precedents, devaluations tend to offset the balance of payments.” It has done little to correct the situation, as most of our problems are low exports/production and inelastic imports. And an ill-conceived devaluation plan will trigger a serious inflationary episode.
A major setback for the market was the decline in remittances. Some analysts blamed this on the widening interbank gap compared to the gray market.
However, a general slowdown was often observed when the data were compared with comparable remittance profiles from other countries.
There is no denying the fact that the gray market is growing rapidly and is a threat. According to Tracemark, a large amount of US dollars and products were seized after a week-long joint operation by agencies along the Pak-Afghan border.
