Tuesday’s trade saw USD/PKR within the range 154.30-154.52. The pair closed flat at 154.30, as market sentiment seemed to have improved on the perception the speed, at which new cases of coronavirus infection are increasing, is slowing down. Yet, it still remains uncertain to what extent the epidemic could spread, which may cap gains.
As the fallout from the coronavirus outbreak widens and risks to Chinese economic growth rise, the government may be prompted to introduce more measures to cushion negative effects. A report by Reuters, citing sources familiar with internal policy, stated that China’s government was discussing a potential reduction of the planned 2020 GDP growth objective of 6%, while the People’s Bank of China could cut the loan prime rate on February 20th and reduce banks’ reserve requirement ratios during the upcoming weeks.
Since 2012, China has been Pakistan’s largest trading partner and any disruptions in trade flows have the potential to adversely affect PKR valuation.
The US Dollar Index was gaining 0.08% to 98.01 in late Asian trade on Wednesday, while being close to a near one-week high of 98.07.
Market focus is now likely to shift on US job growth. A report by ADP at 13:15 GMT may show employers in the US non-farm private sector added 158 000 new jobs during January, as expected by analysts, following 202 000 new positions added in December. In case new job growth exceeds expectations in January, this would have a moderate-to-strong bullish effect on the USD.
Market players will also consider the US trade balance data at 13:30 GMT. The US trade deficit probably widened to USD 48.0 billion in December, according to market expectations, from a deficit figure of USD 43.1 billion in November. The latter has been the lowest trade gap since October 2016, as exports rose 0.7%, while imports decreased 1.0%. In case the trade balance deficit widened more than anticipated in December, this would have a strong bearish effect on the USD, because of the negative 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 January. The respective non-manufacturing Purchasing Managers’ Index is expected to come in at 55.2. In December, the index stood at 55.0, while marking its highest level since August, as the sub-indexes of production and inventories showed accelerated growth. In case the actual index reading exceeds market consensus in January, this would have a strong bullish effect on the USD.
USD/PKR was unchanged at 154.30 in late Asian session on Wednesday.
