The rupee is expected to remain stable against the dollar next week, supported by healthy foreign exchange reserves and increased remittances, according to dealers.
The rupee ended Monday’s interbank trading session at 277.85 per US dollar. On Wednesday, it slipped to 278.04 but recovered by Friday, closing at 277.75.
Dealers anticipate the rupee will continue to trade within its current range due to sufficient dollar liquidity, strengthened by rising reserves and remittance inflows meeting importer demand.
As of November 15, Pakistan’s foreign exchange reserves held by the central bank rose by $29 million to $11.29 billion. The current account balance recorded a surplus for the third consecutive month in October, with a surplus of $349 million. Cumulatively, the surplus from July to October reached $218 million.
Remittances surged 23.9% year-on-year to $3.1 billion in October and totaled $11.8 billion in the first four months of the fiscal year, up 34.7% compared to the same period last year.
A report by Tresmark highlighted strategies for trading the rupee as the year-end approaches. The report assessed the rupee’s fair value using various methods, noting that October’s real effective exchange rate (REER) was 100.9. This suggests the rupee aligns with trade fundamentals, neither significantly overvalued nor undervalued. Stabilizing the REER at 98 would imply a rupee value of around 285 per dollar.
Using the inflation-adjusted purchasing power parity (PPP) approach, the rupee’s fair value is estimated at 260 per dollar, indicating a 6% undervaluation relative to inflation-adjusted metrics.
Market sentiment and risk perception remain significant drivers of exchange rates. According to the report, market sentiment has improved in recent months due to the IMF program, current account surpluses, reserve accumulation, better ratings, and stable trading conditions. However, political uncertainty and a deteriorating geopolitical landscape persist.
In the open market, demand increased in northern regions, attributed to upcoming PTI protests and retail investors buying gold during price dips.
In the interbank market, the rupee remained range-bound despite significant oil payments and gradual outflows from the special convertible rupee account in Treasury Bills. Dealers foresee no significant demand spikes as the year-end approaches, with defence-related payments being made on time.
The report emphasized the significant contribution of rising remittances, which have added $6–8 billion annually, resulting in current account surpluses and improved dollar liquidity.
