A recent report, citing an anonymous former State Bank official, indicates a significant potential decrease in the value of the United States dollar compared to the rupee over the next year. This shift is attributed to real interest rates entering positive territory, likely influencing exchange rates.
The forecast anticipates a possible drop of the US dollar by up to Rs55, equivalent to nearly 20% of its current value, which stands at approximately Rs278 in the interbank market. With inflation on the decline, further reductions in interest rates may alleviate pressure on the exchange rate.
Echoing a similar sentiment, a March report from Goldman Sachs projected the rupee to be nearly 20% undervalued over a 12-month horizon, offering a nominal carry of about 26%. The report expressed optimism regarding the Pakistani Rupee (PKR), citing the convergence of undervaluation, carry, and ongoing disinflation.
However, the report cautioned that macroeconomic dynamics could be influenced by political stability within the country. It also emphasized the importance of managing external financing risks, particularly as Pakistan engages in an extended program with the International Monetary Fund (IMF).
