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Money market review Interbank forex market bullish

RECORDER REVIEW

KARACHI: Interbank foreign exchange market was bullish during the week but the premiums did not rise steeply where one month tenor continued to trade in a band of eight to ten paisa while two months bids and offers were quoted at 18 to 22 paisa respectively.

According to an analyst from the Finex Securities, the bullish sentiment in the forward market continued during the past week but the overall trading band remained narrow and premiums did not rise steeply. One month tenor continued to trade in a band of eight paisa and 10 paisa, whilst two months bids and offers were quoted at 18 paisa and 22 paisa respectively.

Activity was also witnessed in the four and six month period as trading for four months was seen in the range of 40 paisa to 45 paisa and for six months in the band of 65 paisa to 70 paisa.

The forward premiums on the last day came under pressure on account of supply from the nationalised banks. Ready dollars continued to be available easily with trading being reported between the Rs 51.88 and Rs 51.89 range. He expects the forward market to remain pricey during the week on account of fairly decent outflows from the system.

Regarding interbank money market, the same analyst said that for most the part of trading week, overnight interbank rates remained in double digits and high single digits. The trading was witnessed between 10.50 percent and 10.90 percent, but crashed to the other end of the spectrum on Friday. Rates closed at 0.75 percent but not before trading had been conducted at 6.00 percent, 4.00 percent and 2.00 percent. Healthy reserve averaging, in addition to the injection of Rs 1.80 billion for one week via the two way Open Market Operations (OMO) on Thursday were the factors that contributed towards this bearish spell. But the market turned better for lenders on Saturday and the close was up at 9.00 percent.

The term market during the past week remained generally thin. Yet again the concentration was in the one-month tenor with nominal amounts trading in the band of 7.00 percent and 7.25 percent. The OMO injection did cause these levels to soften but levels rose again on Saturday with bids and offers at 7.20 percent and 7.75 percent respectively.

Three-month borrowers continued to remain unmoved from levels of 7.10 percent of while offers were at 7.45 percent. Interest was evident in five and six months tenors and trading were reported at around the 7.50 percent level but amounts remained thin. Meanwhile, there was considerable demand for one year maturity FIBS, which has continued to increase in the wake of a declining yield curve. Buying interest cropped up during the past week with bids for these papers being quoted in the band of 8.75 percent and 9.00 percent. Outflows on account of OMO injections made in February are due on the 6th and the 7th of March, coupled with the Rs 12.60 billion maturity on the 9th March.

An SBP intervention cannot be ruled out for early next week as rates also remained on a firm note at close on Saturday. Key players are apprehensive about the SBP being hesitant to commit towards an injection in one month and cross the quarter end. It would be interesting to see whether SBP attempts to inject money over the quarter end and its commitment towards keeping rates easy. According to the statement of State Bank of Pakistan, the total demand and liabilities recorded a small decline of Rs 9.1 billion to Rs 1141.9 billion while the borrowing from banks showed marginal fall of Rs 212 million settling at Rs 23.152 billion.

Money at call and balance with the State Bank of Pakistan slipped by Rs 357 million and Rs 1.705 billion, finishing at Rs 31.624 billion and Rs 121.669 billion respectively.

The foreign currency held in Pakistan showed marginal gains of Rs 126 million but balances with banks held outside the country denoted declines after paying dues to some of the foreign airlines and shipping companies which resulted in the fall of Rs 508 million. These heads for the week ended at Rs 3.019 billion and Rs 41.775 billion. The total assets and liabilities spurt by Rs 1.935 billion to close at Rs 534.050 billion. However, money lending to export, agriculture and industrial sectors bogged down by Rs 756 million, Rs 45 million and Rs 7 million, ending at Rs 84.741 billion, Rs 48.641 billion and Rs 9.227 billion respectively.

The deposits with bank grew by Rs 1.123 billion for the week to finish at Rs 85.631 billion from Rs 84.498 billion a week ago. The foreign exchange reserves rose to $1.536 billion in the week ended February 26, from $1.501 billion the previous week. The special drawing rights held with the International Monetary Fund was at $1.225 billion while balances outside the country stood at $311 million.