Goldman Sachs doubts rupee’s rise will continue

The rupee’s rally triggered in early September by a government clampdown on smuggling and hoarding of foreign currency might prove to be short-lived due to its financing risks, Goldman Sachs Group Inc. has warned. “The recent appreciation of the Pakistani rupee will likely be short-lived, given soaring interest costs and only short-term arrangements with the International Monetary Fund and bilateral financing to support the external balance,” Goldman analysts wrote in a Wednesday report, according to Bloomberg. They said the market would continue to require a premium for the rupee ahead of elections. The warning came as the rupee lost its value against the US dollar for the fourth day in a row, falling by 0.07 per cent to close at 280.09 on Thursday. Also, the State Bank of Pakistan (SBP) reported on Thursday that its foreign exchange reserves plummeted $220 million to $7.49 billion for the week ending Oct 20 — the lowest weekly position since mid-July when a big financial boost from the IMF and friendly countries doubled the SBP’s holdings to $8.73bn. During September and most of October, the rupee kept appreciating and has been declared among the world’s best-performing currencies. Currency analysts have been warning that the rupee’s surge has weak fundamentals and that it may reverse with slight shocks in the market.