- Rupee rebounded 57 paisa or 0.24 percent against the dollar on Friday to settle at 239.37.
- The local currency has lost around 60 rupees over the past four months.
- The estimated current account deficit for the quarter of July to September is only $235 million.
Traders are optimistic that the rupee would likely hold its current level of 240 against the dollar in the upcoming week due to an improvement in dollar inflows from exporters and remitters as well as a reduction in the political unrest the country had been experiencing.
After a two-week losing skid against the dollar, the battered rupee rebounded 57 paisa or 0.24 percent on Friday to settle at 239.37, bringing its decline for 2022 to 35 percent. This week, it lost almost 5% of its value.
Since February, the State Bank of Pakistan’s foreign exchange holdings have decreased by $7.811 billion, or about six weeks’ worth of imports, to $8.575 billion in July.
If there is a balance between inflows and outflows, we expect the rupee to stabilize at 240 levels in the coming sessions. Remittances and export revenues may provide support for the rupee, according to a foreign exchange broker.
The local currency has lost around 60 rupees over the past four months. Along with the Turkish Lira and the Sri Lankan rupee, the rupee has emerged as the currency with the lowest performance.
In order to prevent the balance of payments crisis from uncontrollably spreading to other areas of the economy, including the closure of manufacturing facilities, out-of-control inflation, and a breakdown in law and order, Tresmark said in a research note.
“We believe that the worst of the currency movement is over for this week. We also think the IMF permission will be granted within the next two weeks (before August 24 stated), but the government will need to come up with a Plan B if we don’t get any verbal assurances in the next week, it said.
The rupee is anticipated to stabilize. However, it is still necessary to analyze the rupee’s rapid depreciation in order to estimate a target. According to Tresmark, there are very slim chances for a recovery if the devaluation was purposeful or the result of an IMF policy decision in the past.
“However, there will be a gradual rebound of the local currency if the weakness was corrected to account for the unusual outflows in the previous month. If the latter, then making a deliberate attempt to lower prices should also be made because it will give hope to a terrible situation.
Imports have been restricted by the State Bank of Pakistan, and these efforts will start to pay off this quarter. It stated that the estimated current account deficit for the quarter of July to September is only $235 million.
Since Imran Khan, the former prime minister, won by-elections in the Punjab province, Pakistan has been engulfed in political turmoil.
Getting the home in shape “seems to be a window offered by all stakeholders before an inevitable resumption of political wrangling,” it continued.
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