Tuesday’s trade saw USD/PKR within the range 154.30-154.60. The pair closed 0.06% lower at 154.30, as Pakistan’s central bank kept key policy rates unchanged. However, PKR gains were limited, since concerns over the coronavirus outbreak’s economic impact continued to fuel risk aversion.
The Monetary Policy Committee of State Bank of Pakistan kept the benchmark interest rate intact at 13.25%, as inflation outlook has not changed substantially. There still remain short-term risks to inflation, mostly from food price shocks and a potential rise in utility prices. At the same time, factors such as recent PKR appreciation after the market-based exchange rate was introduced as well as ongoing fiscal consolidation are expected to moderate inflation pressure.
The bank also highlighted several key developments since its November policy meeting: the nation’s current account deficit narrowed substantially, fiscal developments remained on track and in unison with commitments under the IMF-supported program, while a survey of business confidence showed optimism regarding economic activity.
Meanwhile, on the US macroeconomic front, a report by the Census Bureau showed new orders for manufactured durable goods had increased more than expected in December, at a monthly rate of 2.4%, while the Conference Board research group said January consumer confidence was the highest since August 2019.
The US Dollar Index was gaining 0.02% to 97.99 in late Asian trade on Wednesday, while being close to yesterday’s eight-week high of 98.16.
The key event today will be the Fed’s decision on monetary policy at 19:00 GMT. The Federal Open Market Committee (FOMC) will probably keep the target range for the federal funds rate intact between 1.50% and 1.75% at its two-day policy meeting, scheduled to be concluded today, according to market expectations.
In December, the bank indicated no plans to cut borrowing costs further in 2020, while a rate hike was still seen possible in 2021. The Federal Reserve kept its economic growth forecast for 2020 without change at 2.0%. The bank’s inflation projection for 2020 also remained unchanged compared to its September forecast at 1.9%.
The policy decision will be followed by a press conference with Fed Chair Jerome Powell at 19:30 GMT.
Additionally, a report by the National Association of Realtors at 15:00 GMT may show the number of contracts to buy previously owned homes in the United States rose 0.5% in December from a month ago. In November, pending home sales increased 1.2%, or the most since September.
USD/PKR was up 0.16% to 154.55 in late Asian session on Wednesday.
