KARACHI: The rupee is projected to remain stable in the coming week, driven by optimism surrounding the first review of the International Monetary Fund’s (IMF) $7 billion loan program, set to commence next week. Market participants expect minimal fluctuations in the rupee’s value as economic factors remain relatively steady.
This week, the rupee exhibited a minor depreciation in the interbank market. It opened at 279.66 against the US dollar on Monday and further declined to 279.72 by Thursday. However, by Friday, the rupee managed to recover slightly, closing at 279.66, reflecting a stable outlook despite short-term fluctuations.
“Since no one anticipated the rupee to gain significantly, forward bookings by exporters remained subdued due to negligible premiums,” noted Tresmark in a client advisory on Saturday. “However, last week, we observed heightened market activity as the rupee held steady and premiums saw a gradual increase. Traders believe that ongoing IMF-led discussions are progressing positively and that Ramadan-related inflows will sustain liquidity in the forex market, thereby ensuring the rupee remains range-bound and prompting a rise in forward bookings.”
Tresmark anticipates the rupee to trade at approximately 279.75 per dollar throughout the upcoming week. However, the currency is expected to weaken slightly to 280 in March and 281.50 by the end of the current quarter.
An IMF delegation is scheduled to arrive in Pakistan next week for the first review of the Extended Fund Facility (EFF). While the country has met all binary conditions, concerns persist regarding tax revenue collection, which may lead to reservations during the review process.
Analysts assert that the State Bank of Pakistan is effectively meeting its objectives, reducing the need for major monetary policy interventions or rupee adjustments. However, a key concern remains the government’s ability to bridge the gross external financing gap. This issue is likely to be scrutinized during the IMF review, as ensuring sufficient forex reserves remains a top priority. The rupee’s stability hinges on these discussions, with market participants closely monitoring any developments that could impact the currency’s trajectory.