KARACHI: The rupee is expected to post slight gains against the dollar next week due to reduced dollar demand from importers, rise in the foreign exchange reserves and positive sentiments after the government launched an initiative in a bid to fetch more investment from abroad to fund the current account deficit and raise foreign exchange reserves, traders said.
“We expect the rupee to see mild gains in the coming sessions on the back of decline in pressure from importers buying dollars,” a trader with a leading commercial bank said.
“We also see a continuousness in the bullish sentiment that will keep the rupee on the stronger side.”
Traders expect the rupee to trade in the range of 165.50 and 166 against the greenback next week.
In the interbank market, the rupee lost 21 paisas to close at 165.97/dollar during the outgoing week.
The currency market reacted positively to the launch of Roshan Digital Account for the non-resident Pakistanis.
Through the opening of this digital account, overseas Pakistanis will be able to send remittances back home to their families in a hassle-free manner.
The adaptation of these digital financial solutions is likely to support remittances in the times to come.
Remittances to Pakistan rose 6.4 percent to a record $23.120 billion in the last fiscal year ended June 30.
Fitch Ratings; however, sees a hit in credit ratings of five South Asian countries, including Pakistan due to a possible decline in foreign currency inflows mainly in remittances and increasing need for financing in this fiscal year.
Roshan Digital Account will provide access to Pakistani diaspora a full range of banking services and exciting investment opportunities in Pakistan from wherever they live, including the soon to be launched Naya Pakistan Certificates issued by the government, as well as the stock market and real estate.
Funds in these accounts will also be fully repatriable, such that they can be remitted back from Pakistan without any prior approval from the central bank.
Traders are also optimistic about the domestic unit in the coming week because of robust foreign currency reserves of the country.
Pakistan’s foreign exchange reserves increased to $19.961 billion during the week ended September 4, compared with $19.842 billion in the previous week.
The SBP’s reserves increased by $95 million to $12.807 billion amid proceeds of $121 million received from Asian Development Bank.
Dealers said the local unit traded stronger in the outgoing week due to reduced dollar demand from importers. Inflows were also adequate to meet the importer demand in the market.
Rating agency Fitch Ratings, in its recent report, forecasts the current account deficit could widen to 1.7 percent of gross domestic product this fiscal year from 1.2 percent a year ago, as it sees a downward trend in remittances and higher financing requirements. The rupee hit an all-time low of 168.43 on August 26, but started recovering when the domestic unit was supported by higher foreign inflows in the form of remittances from overseas Pakistanis and export proceeds.