US dollar may drop to Rs210 in November

Considering expected inflows from the Asian Development Bank (ADB) and Pakistan’s deletion from the Financial Action Task Force’s (FATF) grey list, the currency is projected to strengthen versus the US dollar this week.

According to The News, this week in the interbank market, the local currency dipped by 0.89 per cent in value against the dollar. However, thanks to encouraging news from the ADB and FATF, the local currency increased to Rs220.84 during the last trading session.

According to the analysts, assistance from multilateral creditors during the floods would help boost foreign exchange reserves and strengthen the local currency.

The State Bank of Pakistan’s foreign exchange holdings as of October 14 totaled $7.59 billion, or nearly one month’s worth of imports.

According to Tresmark, a terminal that tracks real-time pricing of financial markets, the rupee is predicted to trade at 216 to the dollar in the coming 10 days and 210 to the dollar in the coming 30 days.

“This is because of ADB-related inflows of $1.5 billion in the coming week and $2 billion of inflows in the first week of November. Of course, this would not have been possible without the finance minister’s undervalued rupee mantra,” Tresmark said in a client note.

Six months from now, though, would be the rupee’s true test, it was said.

Analysts predict that the US interest rate will surpass 5 per cent (a level last reached in 2008) and that the dollar will continue to rise.

Markets expect the Indian Rupee to be at 95 per dollar, the Bangladesh Taka to be at 115 per dollar, and the Yuan to continue declining, despite the fact that major currencies all have a bearish tendency. Although the dollar’s strength is an issue, the global recession continues to be of much greater concern.

A 15-20 per cent decline in exports and a 5 per cent decline in remittances are anticipated by economists, even if the current account deficit (CAD) for September was practically at breakeven.

They continued, saying that maintaining the economic winter would need sustained import compression and additional economic deceleration.

Due to lower letters of credit being settled during the previous week, the rupee somewhat declined. According to market estimates, only around 50 per cent, or roughly $600 million, has yet to be processed.