USD/PKR traded near the lower end of its Monday range. The Institute for Supply Management reported that US manufacturing activity had shrunk for a fourth consecutive month in November.
The Manufacturing Purchasing Managers’ Index came in at 48.1, well below market consensus of 49.2. The sub-indexes of new orders and employment dropped sharply. PMI readings below 50.0 indicate lower activity.
Despite subdued factory data, near-term interest rate expectations remained unchanged. According to CME’s FedWatch Tool, as of December 2nd, investors saw zero percent chance of a rate cut occurring at the Federal Reserve’s policy meeting in December, unchanged from a week ago. The probability of a rate cut in March is now 15.8%, down from 17.4% a week ago.
In Pakistan, annual consumer price inflation was reported to have decelerated to 11.08% in October from 12.55% in September, an 8-year high. This prompted the SNP to take a second straight pause from a series of prior hikes.
On November 22nd the SNP kept its benchmark rate at 13.25%, which has been the highest level in 8 years. High interest rates seemed to have lured the attention of investors. Last week the SNP reported a strong inflow of foreign investments in Pakistani bonds during November, which has kept PKR demand supported. The data showed investors had poured $642.5 million in domestic bonds.
Meanwhile, a report by news website Axios over the weekend stated that US-China trade deal was now stalled due to Hong Kong legislation. The agreement was also stalled, as time was required for Chinese President Xi Jinping’s domestic politics to calm. A potential deal would curb risk aversion and support demand for emerging market currencies.
The US Dollar Index was up 0.05% to 97.840 in late Asian trade on Tuesday.
From a macroeconomic perspective, no relevant reports are scheduled to be released today. Market focus will likely now shift towards the testimony of Fed’s Vice Chair for Supervision, Randal Quarles, as well as the key US labor market and trade data, expected later this week.
USD/PKR was retreating 0.27% to 154.80 in late Asian session on Tuesday, nearing lows not seen since early July (154.70).