Rupee Poised to Remain Stable Amid Weighing Dollar Risks

The Pakistani rupee is expected to remain stable in the near term as investors weigh the risks of the US dollar. According to a report, the currency has been supported by improving dollar liquidity and increased exports, but this exceptional support may begin to fade.

Exporters have booked more than $3 billion in forwards, the highest outstanding level in over six years, which has provided meaningful dollar support to the market. However, new forward bookings have recently slowed down, suggesting that this source of inflows may gradually normalize.

Pakistan's exports rose to $2.9 billion in July, the highest monthly reading in five years and the second-highest on record. Despite this, the outlook for August and September is less encouraging due to softer global demand and signs of stagflationary pressures in the US potentially weighing on shipments.

The rupee's stability will depend in part on whether foreign investors return to Pakistan's financial markets. Recent gains have been driven largely by domestic investors, while overseas participation is likely to require greater confidence in the foreign-exchange market, continued political and policy stability, and deeper market liquidity.