The Pakistani rupee is anticipated to maintain stability against the US dollar in the short term as market participants closely monitor the State Bank of Pakistan’s (SBP) upcoming interest rate decision later this month.
During the previous week, the rupee exhibited minimal fluctuations in the interbank market, starting at 277.75 per dollar on Monday and closing at 278.05 on Friday. The recent stability is attributed to positive market sentiment following significant foreign inflows into the country.
On Thursday, the SBP received $500 million from the Asian Development Bank (ADB) as part of a loan to bolster Pakistan’s Climate Change and Disaster Resilience Enhancement Programme. This inflow is expected to push the central bank’s foreign exchange reserves to approximately $12 billion, up from $11.42 billion recorded on November 22. These reserves are sufficient to cover over two months of import expenses, providing a buffer against external economic pressures.
Market participants remain cautious ahead of the SBP’s monetary policy meeting on December 16. Many analysts predict a 200-basis-point cut in the benchmark interest rate, which currently stands at 15 percent. This would mark the fifth consecutive rate cut as the central bank aims to stimulate economic activity amid declining inflation. However, analysts expect the SBP to adopt a measured approach to ensure exchange rate and fiscal stability while accounting for potential inflationary pressures early next year.
The government forecasts inflation to range between 5.8 and 6.8 percent in November, with a further decline to 5.6–6.5 percent in December. This follows a decrease in October’s inflation rate to 7.2 percent from 6.9 percent in September.
Corporate behavior also reflects optimism about rupee stability. Exporters have been actively selling forward contracts, though activity may slow if forward premiums remain subdued. Companies are taking advantage of low foreign exchange loan rates, betting on continued stability in the rupee value against the dollar.
The SBP is expected to conduct sell-buy swaps, fulfilling an IMF condition to unwind short swaps from its balance sheet. This move is likely to sustain forward premiums temporarily, offering traders opportunities in the short term.
