The coming week may witness the Pakistani rupee continuing its bullish streak against the US dollar.
Over the past week, the local currency showcased a 1.41% hike against the dollar. Initiating at 295.95 per dollar on Monday in the interbank market, the week ended positively, with the rupee standing at 291.76 on Friday.
A forex dealer remarked, “While we predict the rupee’s rise will sustain, a drastic hike against the dollar seems unlikely.” He further highlighted, “Efforts against illicit dollar dealings and black market activities seem fruitful. The availability of foreign exchange has expanded due to dollar sales by exporters and an uptick in daily remittances.”
Central Bank’s Proactive Measures
To boost legal remittances, the State Bank of Pakistan (SBP) rolled out financial perks for banks, solidifying the rupee’s position. An increment was observed in the central bank’s foreign exchange reserves, marking a $56 million surge, ending at $7.7 billion for the week concluding on September 15.
The backdrop of escalating oil prices has overshadowed the potential decrease in inflation in the foreseeable future. The combination of a stable rupee, enhanced reserves, rigorous anti-smuggling campaigns, and reduced prices of essentials like wheat and sugar fuels this optimism.
The Election Commission’s announcement of elections scheduled for January 2024’s final week has dissolved lingering postponement concerns, triggering a wave of positive investor sentiment.
Market Anticipations and Inflation Concerns
The market is gearing up for the rupee to hover within the 290-295 bracket, potentially reaching July’s 286/dollar mark.
Pakistan envisions remittances to touch approximately $2.5 billion due to grey market crackdowns and enticements for remitters. Despite this, combined with increased September exports ensuring robust forex liquidity, the remaining import backlogs will maintain market demand.
However, despite measures yielding positive outcomes for the rupee, commodities like sugar, wheat, and cooking oil, a drastic dip in the prevailing inflation is unforeseen, mostly attributed to surging fuel and energy rates.
