The recent Pakistani rupee surge has hit a major barrier recently. The USD/PKR exchange rate rebounded from last month’s low of 275.80 to a high of 282. 11. It remains 8.25% below the highest point this year.
Pakistan inflation easesThe Pakistani rupee has been one of the best-performing currencies in the past few weeks even as the US dollar index (DXY) surged. The currency rallied after the Pakistani government launched a massive battle to save it.
It did that by having a crackdown on illegal dollar trade and putting restrictions on companies in the forex trading industry. It also fought a battle to end the parallel market that has been flourishing for years.
Recently, however, the Pakistani rupee has lost the momentum as I predicted in my last report. While the crackdown was long overdue, the reality is that Pakistan faces numerous challenges ahead.
There is an upcoming election that could be highly divisive. In most periods, emerging market currencies tend to underperform towards a major election. We saw that recently with the Nigerian naira, Zimbabwe dollar, and the Argentinian peso.
The other big risk that the PKR currency faces is a big debt maturity that comes in 2024. That bond, which is in dollars, will lead to more currency pressure since the economy is not doing well. Pakistan is now in talks with the IMF and other lenders. The agency’s team will visit Pakistan on Thursday to deliberate the next release of $700 million under the $3 billion program.
The most recent Pakistani rupee news came from the country’s statistics agency. In a report, the agency said that Pakistan’s inflation drifted downwards in October after the government slashed fuel prices.
The headline Consumer Price Index (CPI) dropped 26.89% in October from 31.4% in the previous month. The retreat was in line with what the Pakistani central bank had predicted in its recent meeting. In its last meeting, the bank left interest rates unchanged for the third straight meeting.
USD/PKR technical analysis
The daily chart shows that the USD to PKR exchange rate has made a bullish comeback in the past few days. It has rebounded to a high of 282.10, which was higher than the year-to-date low of 275.80. It remains below the 25-day and 50-day exponential moving averages (EMA).
The outlook for the USD/PKR pair is now bearish, with the next level to watch being at 275.80, the lowest point in October. In the long term, however, I believe that the pair will bounce back as buyers retest the important psychological level of 300.
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