The rupiah should stabilize at 240 against the dollar

A man counts Pakistani rupee banknotes with stacks of dollar banknotes and rupee banknotes lying on the table. — Reuters/File
  • The local currency is expected to maintain its current level of 240 against the US Dollar next week.
  • The battered rupee gained 57 paisa or 0.24% to close at 239.37 after a two-week losing streak against the dollar on Friday.
  • The State Bank of Pakistan has taken some measures to stifle imports and this will start bearing fruit in the current quarter.

KARACHI: Owing to an improvement in dollar inflows from exporters and shippers and some easing of the political uncertainty the country was shrouded in, traders are hoping the rupiah will likely hold its current level of 240 against the greenback in the coming week.

On Friday, the battered rupee gained 57 paisa or 0.24% to close at 239.37 after a two-week losing streak against the dollar, taking its fall for 2022 to 35%. It depreciated about 5% this week.

Foreign reserves held by the State Bank of Pakistan have fallen by $7.811 billion since February to $8.575 billion in July, enough to pay for about six weeks of imports.

“We see the Rupee stabilizing at 240 levels in the coming sessions if there is a match between inflows and outflows. The Rupee can draw support from remittances and export earnings,” said a currency trader.

Over the past four months, the local unit has depreciated by about 60 rupees. The rupee became the worst performing currency along with the Turkish lira and the Sri Lankan rupee.

It is important to get the currency under control, otherwise balance of payments crises could spread out of control to other aspects of the economy, including the closure of manufacturing units, runaway inflation and the state of the economy. law and order, Tresmark said in a research note.

“This week, our view is that the worst of the currency movement is behind us. We also believe that IMF approval will be within the next two weeks (before August 24th indicated), but if we do not receive of verbal reassurance in the coming week, the government will have to come up with a plan B,” it said.

The rupiah should consolidate. However, to estimate a target for the rupee, one still has to dissect the rapid deterioration of the rupee. If it was a devaluation (either intentional or one of the IMF’s prior actions), there is very little chance of a recovery, according to Tresmark.

“However, if the weakening has been adjusted to compensate for the extraordinary outflows of the past month, then there will be a gradual recovery in the local currency. If it is the latter, then a conscious effort to drive down the dollars should also be done because it will instill confidence in a hopeless situation.

The State Bank of Pakistan has taken some measures to stifle imports and this will start bearing fruit in the current quarter. The projected current account deficit for the July-September quarter is just $235 million, he said.

Pakistan has been plagued by political uncertainty since ousted Prime Minister Imran Khan won by-elections in Punjab province.

“There appears to be a window offered by all stakeholders to put the house in order before an inevitable resumption of political maneuvering,” he added.

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