June 25, 2020 (MLN): Yesterday (June 24) when it touched 168 per one USD. Rupee lost 5% of its value in little over 30-days. Quite a few eyebrows were raised.
No one realised that what is pushing Rupee down. Earlier, $ 4 billion SCRA outflow or HOT MONEY was already adding pressure on Fx Reserves. But outflow of nearly $ 3.37 billion this month added immense pressure on Rupee.
In June 2020, Debt Servicing amount is $ 1.77 billion & in this month there were 2-maturities of $ 1.6 billion that was not rolled over, it all added immense pressure on Rupee. Despite all odds, SBP Fx Reserves fell by $ 2 billion & it is well above $ 10 billion.
As sizeable inflow is visible, Rupee could anytime make a comeback. PKR has the ability to sharply bounce back once June end payments are settled, or unless there is more in pipeline due to FY end payments, which could be the only hurdle for Rupee to make gains.
As per my calculations, Banks are comfortable with their US Dollar holdings. This means that Bank’s Net Open Position (NOP) holding of foreign exchange is nearly 1/4 of their total allocated limit, suggesting that they are not sitting with tighter FX position.
Furthermore, size of Remittances inflow prior to EID UL AZHA is larger than EID UL FITR, which gives a hints that further inflow from overseas is expected anytime soon.
Therefore, in all probability Rupee has the ability to sharply bounce back that could happen anytime from now onwards until next week.
(The writer is former Country Treasurer of Chase Manhattan Bank)
Disclaimer: The opinions in this article are the author’s and do not necessarily represent the views of Mettis Link News (MLN)
