Rupee recovers 71 paisas in inter-bank market

Country makes international payments while significant inflows are in offing

KARACHI: The Pakistani currency maintained uptrend for the second successive day on Thursday, as it cumulatively regained Rs0.71 to stand at Rs167.18 against the US dollar in the inter-bank market after the country made major international payments while significant inflows were in the offing.

Since the partial lockdown imposed on March 23, the currency had depreciated Rs9.08, or nearly 6%, to a record low closing at Rs167.89 on Tuesday (April 7), according to the State Bank of Pakistan (SBP).

“We have smoothly sailed out of the difficult times (regarding rupee/dollar exchange rate), Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan said while talking to The Express Tribune. “The rupee may recover to around 165 over the next one to two weeks and maintain therein the medium run,” he said.

The rupee had depreciated due to excessive demand for dollars which came on the back of panicked foreign investors during the local lockdown, as majority of them took an exit from the regional and international debt and stocks markets, including Pakistan, to keep cash in hands to cope with the coronavirus pandemic.

“Foreigners have pulled-out major investment (hot money) from Pakistan’s debt market. The balance investment stands less than $1 billion compared to a cumulative investment they made at $3.5 billion over the prior eight months (July-February),” he added.

The balance foreign investment in Pakistan’s bond market ie T-bills and Pakistan Investment Bonds (PIBs) stands at $907.27 million, according to the central bank.

“Remaining foreign investors may decide to stay in Pakistan considering the outstanding fixed rate of profit of around 10% compared to around 1% or less in the developed markets,” he said, adding that if they opt to exit it would not impact the country badly. International financial institutions like International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB) are estimated to provide some $3.5-4 billion to Pakistan to help fight against the pandemic.

“The inflows are expected to arrive over the next three to four months in Pakistan. The inflows would be more than the outflows seen in recent days from Pakistan,” he told.

Meanwhile, Topline Securities Director Research Atif Zafar said, “Re-opening of currency exchange companies from Wednesday helped to ease pressure on the rupee.”

“The uptrend in rupee seemed to be short-term in nature. It is unlikely to sustain beyond days and a week,” he said.

Earlier, his research house anticipated rupee at 170 by end-June 2020.

Bostan further added that some 50% exchange companies have resumed currencies trade on physical counters with effect from Monday after the government’s approval.

“The resumption was a must to help individuals receive remittances sent by their family members from aboard. We facilitate receipt of remittances worth around $150 million a month. We have supplied $10 million to the government in the past two days (Tuesday-Wednesday) through the inter-bank market,” he said.

The rupee may come under pressure if the pandemic prolongs for more than a month or two. “Some 35,000 Pakistanis have lost their jobs in UAE,” he said.

Rays Commodities former chief operating officer Adnan Agar said that the rupee should maintain uptrend since the businesses are slowly returning to work with a drop in the graph for new coronavirus cases in Pakistan.

“We are moving towards smart lockdown, meaning people will be allowed to move cautiously in the areas where the virus cases would be next to nil,” he said.

“Besides, the rupee should recover as the US dollar is losing against other world major currencies like the pound and euro at world markets,” he commented. 

Published in The Express Tribune, April 10^th, 2020.

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