Karachi, October 13, 2024 – The Pakistani rupee is forecasted to maintain stability against the US dollar in the coming week starting October 14, 2024, buoyed by adequate dollar supplies and a steady increase in foreign exchange reserves, currency dealers predict. Despite minor fluctuations this week, the rupee is expected to stay within its current range as demand for dollars is met by sufficient liquidity in the market.
In the interbank market, the rupee demonstrated slight volatility over the week. It began at 277.64 per dollar on Monday but dipped to 277.79 by Thursday. However, by the end of the trading week on Friday, it had regained some ground, closing at 277.63 per dollar. Market experts believe that the rupee’s stability is supported by the availability of dollars, which is helping to balance market demand.
“The rupee is likely to remain steady next week, as there seems to be enough dollar liquidity to meet market demand,” commented one currency dealer. This outlook is reinforced by the rise in Pakistan’s foreign exchange reserves, which increased by $106 million, reaching $10.808 billion as of October 4, 2024.
In addition to stronger reserves, remittance inflows have significantly bolstered the rupee. Overseas Pakistanis sent home $2.8 billion in September, marking a 29% year-on-year increase. In the first quarter of FY25, remittances totaled $8.8 billion, reflecting a robust 39% growth compared to the same period last year.
However, while the rupee remains range-bound, the currency swap premiums have exhibited volatility. According to Tresmark’s weekly report, one-month and three-month swap premiums are trading at low levels of 65 and 220 paisas, respectively, deterring exporters from locking in forward bookings. “The probability of the rupee weakening before the year-end has diminished from an exporter’s perspective,” the report highlighted.
The report further noted that the government has opted to control the rupee’s exchange rate despite opportunities to weaken it and potentially stimulate growth. This decision comes as inflation has hit a multi-year low, and Pakistan recently secured its IMF deal.
With the IMF monitoring Pakistan’s financial management closely, the likelihood of drastic interest rate cuts seems slim. While a 200 basis points reduction in each of the next two monetary policies is considered the best-case scenario, the IMF has expressed concerns over the banking sector’s reliance on government borrowing amid global economic uncertainties.
Moreover, Pakistan’s gross financing requirement for FY25 has fallen to $18.8 billion—a nine-year low—driven by a contained current account deficit and lower debt repayments. This marks a sharp decline from previous estimates, providing a more optimistic outlook for Pakistan’s fiscal stability in the coming years.