Monday’s trade saw USD/PKR within the range 154.70-155.00. The pair closed 0.16% higher at 154.70, bouncing from Friday’s near one-month low of 154.45, registered on the back of a grim manufacturing report by the ISM. The data showed the deepest contraction in US manufacturing in more than 10 years, while order volumes shrank to an almost 11-year low.
Demand for riskier assets was sharply curbed due to fears of escalating Middle East tensions after Iran’s Major-General Qassem Soleimani was assassinated on January 3rd in a US drone strike on his convoy at Baghdad airport.
In its first quarterly report, the State Bank of Pakistan said macroeconomic stabilization had picked up momentum with the initiation of the IMF’s Extended Fund Facility program. The bank continued to keep monetary policy in accordance with medium-term inflation objective, while a market-based exchange rate system was introduced, to which the interbank foreign exchange market adjusted relatively well.
The SBP report also noted the government should continue addressing the underlying structural vulnerabilities and put the economy on a balanced and sustainable growth trajectory.
The US Dollar Index was gaining 0.09% to 96.71 in late Asian trade on Tuesday.
As US-China trade relations will remain a closely watched topic, today’s focus will be on the US trade balance report, scheduled at 13:30 GMT. The US trade deficit probably narrowed to USD 43.9 billion in November, according to market expectations, from a deficit figure of USD 47.2 billion in October. The latter has been the lowest trade gap since May 2018, as exports went down 0.2%, while imports decreased 1.7%. In case the trade balance deficit narrowed more than anticipated in November, this would have a strong bullish effect on the USD, because of positive implications concerning economic growth.
A separate report by the Institute for Supply Management at 15:00 GMT may show activity in the US sector of services continued to expand in December. The respective non-manufacturing Purchasing Managers’ Index is expected to come in at 54.5. In November, the index stood at 53.9, slowing from October’s reading of 54.7, as the sub-index of business activity decelerated sharply, while those of employment and new orders registered accelerated growth. In case the actual index reading exceeds market consensus in December, this would have a strong bullish effect on the USD.
USD/PKR was edging up 0.19% to 154.99 in late Asian session on Tuesday.
