- Investors will not take long positions, says Forex Trader.
- The trader has predicted that demand will remain flat till after the budget.
- SBP is expected to maintain its key policy rate at 21 percent.
KARACHI: Ahead of the federal budget for fiscal year 2023-24, the interbank market is expected to trade at a range of Rs. News reported on Sunday.
Finance Minister Ishaq Dar will present. Federal budget On June 9 (Friday) while the State Bank of Pakistan (SBP) will announce its monetary policy decision on June 12 (Monday).
A forex trader said: “The rupee is likely to trade within the current range as investors will not take long positions. Demand is likely to remain flat till after the Budget as there is some uncertainty about whether What can be announced.”
During the outgoing week, the rupee traded in a narrow range, ending the week at 285.68 per dollar and on Friday at 285.42. It weakened by 0.09 percent against the dollar.
However, the local currency made a significant comeback in the open market, gaining Rs 15 against the greenback. The exchange rate increased from 315 to 300 per dollar.
The rupee appreciated significantly after the State Bank allowed commercial banks to buy US dollars from the interbank market to settle card-based cross-border transactions through international payments schemes.
Another factor contributing to the recovery of the rupee was the International Monetary Fund’s (IMF) recommendation to the government to focus on restoring the proper functioning of the foreign exchange market. The IMF was concerned about the widening of the spread between official and curb market rates.
“Despite acrobatics in the open market, which saw the rupee rise between Rs 10-15, fundamentals remained unchanged,” Tracemark said in a weekly note.
SBP has started clearing airline payments, which were blocked for months. The open market will continue to be under pressure as many imports are being made through hawala/handi channel.
“Overall, considering the government’s intention to control the local currency, the rupee still looks limited in the interbank market in the coming weeks,” it added.
Of Pakistan Foreign exchange reserves A decrease of $218 million to $9.513 billion. State Bank reserves fell by $102 million to $4.090 billion.
However, a related area is the decline in commercial banks’ deposits, which fell by $116 million to $5.422 billion. Exports declined by 12.14 percent to $25 billion in the 11 months of the current fiscal year.
SBP is expected to maintain its key policy rate at 21% in the next policy review as inflation is likely to moderate in June due to higher base effect, lower global commodity prices and weaker demand.
This view is reinforced by price action in the bonds and swaps markets, which have stabilized at lower levels.
“The rupee has been broadly range-bound in the past few weeks, where political temperatures have also cooled. The current account has been in surplus for the past two months and is expected to be in surplus by $180 million in May as well. All these Factors will not change interest rate sentiment,” Tresmark said.
The timing of monetary policy, just two days after the expected budget, will be difficult for traders to navigate. The budget will not only reflect the economic and growth outlook, but will also have implications for how the IMF perceives it, which will be important in assessing the medium to long-term impact.
“Any tactic to buy votes by subsidizing or increase revenue by burdening the existing tax base will quickly lead the markets to collapse, as even the current government has admitted,” the weekly note said. There is no Plan B without F.” .