- June 28, 2025
- Posted by: Tresmark
- Categories:
Why is there pressure on the Rupee?
Why are open market rates/Imports higher?
Why is there a dollar shortage?
Why did forex reserves drop?
Is there panic in the markets?
What is the Rupee Outlook?
Use the following symbols on Tresmark to follow:
PKR = Rupee Interbank
PKC = Rupee Corporates
PKRK = Rupee Kerb
Why is there pressure on the Rupee?
The current account is most in surplus, which means the inflows outstrip the outflows. The pressure is mostly because the Central Bank is aggressively buying dollars from the Interbank market to boost forex reserves to meet one of the IMF conditions, forcing banks to be short.
Why are open market rates/Imports higher?
Banks are short and need to cover. But since they can’t offer higher rates to exporters (due to regulatory caps), they’re offering more to remitters. So naturally, if they’re buying higher, they’ll sell higher.
Why is there a dollar shortage?
It’s psychological and tactical. Since banks are offering 1–2 rupees more on remittance inflows, sellers are holding backin the hope that rates will drift even higher. The higher you bid, the more people hold.
Why did forex reserves drop?
Reserves declined by $2.65 billion, largely attributed to repayments made to Chinese commercial banks. While the market was surprised by the timing and scale of the outflow, Tresmark’s assessment is that the $2.7 billion repaid will return shortly, consistent with the practice of Chinese banks to formally “clean up” rather than directly roll over facilities. However, SBP has not said anything related to this or the timing of this.
SBP clarified that inflows of $3.6 billion, already received, will reflect in the reserves position for June 26. This is consistent with Tresmark Research expectations as mentioned in the note last week.
It is possible that country forex reserves will close about $20bn mark if the Chinese banks credit the $2.7bn by Monday.
Is there panic in the markets?
Since most people are unaware of the reason for higher rates and dollar shortage, there is a hint of panic in the public.
But we believe, the conditions will improve next month as SBP will ease its buying and may provide some forex liquidity in to the system. Traders are of the view that the market is short by about $400mn, which is not a substantial amount.
Analysts are expect the SBP to discourage the dual rate mode of practice that has popped up not only because it sows confusion, but the beneficiaries of higher remittance rates are large exchange companies sitting outside Pakistan who make more profits
What is the Rupee Outlook?
We expect Rupee to consolidate in the 284-285 band next month. We’ve revised this slightly due to:
– Dollar weakening 2.5% globally last week
– Correction in oil prices
– REER stabilizing around 97.8 (Rupee still undervalued)
– Sharp inflow of $3.6bn this week
Interest Rates
As expected in last week’s note, Brent stayed below $83, even during peak tensions (including Strait of Hormuz threats). In fact, Brent is now at $67, which has eased inflationary pressure.
As a result, short-term T-Bill yields are down ~30bps, and market sentiment now leans towards a rate cut in the next Monetary Policy.
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