The Pakistani rupee was one of the few currencies to advance versus the mighty US dollar across the previous week. The US dollar Pakistani rupee exchange rate declined -0.13% last week, closing at 154.515.
The US dollar is attempting to pare those losses in early trade on Monday. USD/PKR is trading 0.1% higher at 154.570 at the time of writing.
USD to PKR: Dollar, well supported across the previous week
Flows into the greenback increased on solid US data and as investors sought safe haven assets amid the continued spread of coronavirus.
The US non-farm payroll, the most closely watched US data point across the month, showed that 225,000 jobs were created in January. This was significantly above the 160,000 that analysts had predicted. The wages component of the jobs report was also upbeat, revealing wage growth to be 3.1% annually, above the 3% analysts had pencilled in.
The strong jobs data comes ahead of Federal Reserve Chair Jerome Powell’s semiannual testimony before Congress later this week. Investors will be expecting a positive tone to the testimony in light of recent data. However, should Jerome Powell focus on the potential impact of coronavirus outbreak on the global and US economy, the dollar could take a hit.
Pakistani Rupee
The Pakistani Rupee showed resilience last week despite perceived riskier currencies broadly losing ground versus the safe haven US dollar. The spread of coronavirus is expected to remain front and central for investors as the number of people infected reaches 40,000 and the number of deaths breaches 900.
There is no high impacting Pakistani economic data due for release this week. As a result, investors will continue focusing on coronavirus developments in China and the potential impact of the deadly virus on China’s economic growth.
Recent changes in Pakistani foreign policy have strengthened economic ties between China and Pakistan considerably. China is Pakistan’s second largest trading partner. This means that the Pakistani Rupee can, to a degree, also be considered a proxy to China.
Concerns have been growing over the potential impact of coronavirus on Chinese economic growth. It is now widely accepted that China will not reach its 6% GDP target, with economists considering 5.4% – 5.6% as more realistic. A significant slowdown in Chinese GDP could also spill over into the Pakistani economy.