Analysts predict that the Pakistani rupee will likely remain stable against the US dollar in the coming week and continue its trend until the end of the current fiscal year.
However, they caution that the currency may face downward pressure thereafter, highlighting various factors influencing its trajectory.
During the past week, the rupee demonstrated modest gains against the dollar in the interbank market. Starting the week at 278.24 per dollar on Monday, the rupee closed slightly stronger at 278.12 by the end of Friday.
While some stakeholders in the market are anticipating a further decline in the value of the rupee, particularly hoping for it to trend below 270 against the dollar, analysts argue that such a scenario is unlikely and not sustainable in the long run. A drastic depreciation of the rupee could have adverse effects on the country’s trade balance, attract scrutiny from international financial institutions like the IMF, and disrupt the real effective exchange rate (REER).
Moreover, factors such as increased outflows expected towards the end of June and impending loan repayments further complicate the outlook for the rupee. These financial obligations could exert additional pressure on the currency’s stability in the near term.
The current stability of the rupee can be attributed to a combination of factors, including the economic slowdown, reduced imports, crackdown on parallel markets, and a tight monetary policy. However, analysts caution that any attempts to stimulate economic growth could potentially lead to an uptick in imports, thereby undermining the stability of the rupee.
As the country seeks to prioritize economic growth, policymakers may need to strike a balance between supporting local markets and managing the trade deficit. Subsidizing importers at the expense of domestic industries may not be a sustainable approach in the long term, especially if it leads to a widening trade imbalance.
Overall, while the rupee is expected to maintain its stability against the dollar in the short term, uncertainties remain regarding its future trajectory. Policymakers will need to carefully navigate these challenges to ensure the currency’s stability while fostering sustainable economic growth in the country.