The Pakistani rupee is expected to maintain stability, staying below the 280 level against the US dollar in the upcoming week, according to a recent market report.
During the past week, the rupee exhibited minimal fluctuations in the interbank market. It began at 278.65 against the dollar on Monday, slightly depreciated to 278.81 by Tuesday, and closed at 278.75 on Friday, reflecting its limited movement.
Despite the stability, market factors are placing subtle pressure on the rupee. The currency faces challenges such as debt repayments, outflows from bonds held in special convertible rupee accounts, profit repatriations, and increased import activity. Additionally, regional currency trends, particularly the weakening of the Indian rupee, are influencing the PKR. Any policy rate adjustments by the State Bank of Pakistan (SBP) could further impact the rupee’s performance.
Analysts predict a minor adjustment in the exchange rate, though the rupee is expected to remain below the 280 per dollar threshold in the near term. Projections from Tresmark suggest the rupee will likely trade at 279 against the dollar in the coming week, average 279.5 for the month, and reach 281 by the end of the current quarter.
The SBP is set to review its monetary policy on Monday, with most analysts anticipating a 100 basis points cut in the policy rate. This follows a recent 200 basis points reduction last month, which lowered the rate to 13%. The SBP’s cumulative rate cuts since June 2024 now total 900 basis points.
However, the country’s foreign exchange reserves remain under pressure. Reserves held by the central bank declined by $276 million to $11.449 billion as of January 17, primarily due to external debt repayments. Total forex reserves fell by $262 million to $16.189 billion, though commercial bank reserves saw a slight increase of $15 million, reaching $4.741 billion.
Foreign investment activity in treasury bills also reflects a mixed trend. While $51.978 million was invested by January 10, withdrawals of $90.510 million resulted in a net outflow of $38.5 million for the period. Cumulatively, Pakistan recorded net inflows of $142 million in T-bills for the current fiscal year.
Despite challenges, the rupee’s steadiness below 280 offers cautious optimism for the near term.