According to traders, the rupee is anticipated to continue under pressure against the dollar next week because to importer demand for foreign currency and the effect of rising crude oil prices.
“We’re still pessimistic on the rupee next week and expect it to weaken more, albeit slowly,” a foreign exchange dealer at a commercial bank said.
“Traders believe that if demand rises due to the removal of coronavirus limitations, oil importer prices will rise even more.”
Around the next sessions, they predict the rupee to trade in the 171.25-171.55 range.
Crude oil hit a new high of $85 per barrel on Friday, the most since October 2018.
Traders are worried about the impact of a worldwide commodity price rise, particularly oil prices, on the country’s trade balance.
They believe that this will result in currency depreciation.
During the previous week, the rupee continued to lose momentum, reaching a new low of 171.20 per dollar in the interbank market.
Until the International Monetary Fund’s lending program begins, some dealers believe the rupee would remain near 171 levels. The local currency will then begin to consolidate, although a large current account deficit will likely preclude a rapid increase in the exchange rate.
The government would finalize the subject with the IMF shortly, according to Finance Minister Shaukat Tarin, who is in Washington to negotiate with the Fund for the renewal of the $6 billion loan facility. His meeting with the IMF was extremely good, he added.
Traders, on the other hand, are waiting for the IMF to recognize the government’s measures and the sixth review to be completed successfully, which will clear the way for the transfer of $1 billion to Pakistan.
The IMF’s re-entry into the program may boost traders’ confidence.
Meanwhile, Pakistan successfully paid the Sukuk’s maturity of $1 billion this week. These outflows will be reflected in future reports on foreign exchange reserves.
The foreign reserves fell again this week, but the rate of decline has decreased. The country’s reserves decreased to $25.969 billion from $25.999 billion the previous week.
This quarter is also projected to see some outflows due to Chinese investments, putting pressure on the currency reserves.