USD/PKR Rises above 155 Mark as US – Iran Tensions Seen Escalating

Tuesday’s trade saw USD/PKR within the range 154.70-155.06. The pair closed 0.06% higher at 154.80. Broad emerging market currency sell-off, witnessed on Monday, seemed to have eased, but sentiment remained fragile due to concerns over deteriorating relations between the US and Iran.

Earlier on Wednesday Iran launched missiles at US-led forces in Iraq in response to the US drone strike on an Iranian military head on Friday. Iran’s state television reported that 15 missiles had been launched against US targets in Iraq.

In a Tuesday interview with CNN, Iran’s Foreign Minister Mohammad Javad Zarif had said that the assassination of a top Iranian general by the US was an act of state terrorism and might lead to a proportionate response by the Islamic country.

US President Trump had said over the weekend that the US could assault 52 Iranian sites, including some of cultural importance to Iran, if the latter attacked US assets or Americans. The US strike might probably be “in a disproportionate manner” if Iran attacked any American target, Trump had said.

In other news, Pakistani parliament approved on Tuesday the term extension for Chief of Army Staff General Qamar Javed Bajwa for another 3 years despite opposition by two smaller parties. PM Khan’s government had backed the extension in August.

On the macroeconomic front, US trade deficit was reported to have shrunk more than anticipated to USD 43.1 billion in November from a revised down shortfall of USD 46.9 billion in October. It has been the lowest trade deficit since October 2016.

A separate report by the ISM showed US services sector activity expanded at a faster-than-anticipated rate in December, which gave USD a boost.

The US Dollar Index was down 0.08% to 96.89 in late Asian trade on Wednesday.

A report by ADP at 13:15 GMT today may show employers in the US non-farm private sector added 156 000 new jobs during December, as expected by analysts, following 67 000 new positions added in November. The latter has been the slowest jobs gain since May. In case new job growth exceeds expectations in December, this would have a moderate-to-strong bullish effect on the USD.

At 15:00 GMT Fed’s Governor Lael Brainard is expected to speak on “Modernizing the Community Reinvestment Act” at Urban Institute, Washington, D.C. Any remarks concerning the Bank’s future policy or US macroeconomic environment would heighten USD volatility.

USD/PKR was edging up 0.20% to 155.11 in late Asian session on Wednesday.


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