Asian and emerging market currencies are being pounded in early trading on Monday, whilst the safe haven US dollar is trading broadly higher, as coronavirus fears continue to dominate the financial markets.
The US dollar Pakistani Rupee exchange rate was on the rise, up 0.2% to 154.220 at 09:30 GMT, paring losses of 0.15% across the previous week.
Coronavirus Weighs On Pakistani Rupee
The rapid spread of the coronavirus is sparking fears of a pandemic, sending investors flocking towards safe haven assets and away from perceived riskier emerging market currencies such as the Pakistani Rupee.
Outside of China, Italy, South Korea and Iran have all posted a sharp rise in the number of confirmed coronavirus cases. The World Health Organisation has said that it is concerned over the large rise of cases which have no clear link to the Wuhan province, the epicentre of the outbreak.
In other news, the latest report from Credit Suisse concluded that the Pakistan economy was on the road to recovery. The Swiss financial firm said that fundamentals in Pakistan have improved significantly owing to assistance from the International Monetary Fund (IMF), much needed reforms and fiscal consolidation. Credit Suisse also gave an upbeat assessment on Pakistan’s economic outlook. The firm added that they expect the State Bank of Pakistan to cut interest rates in the by 1% – 2% in the second half of this year as the rupee finds a more stable path. The positive commentary from Credit Suisse has helped under pin the Rupee and cap coronavirus inspired losses.
Dollar Firm On Safe Haven Flows
The dollar was paring last week’s losses in early trade as investors sought safe haven assets in the face of growing coronavirus anxieties. Interestingly the Japanese yen, which is traditionally a safe haven was under performing. Analysts suggest that this is because investors are starting to differentiate safe haven currencies more vulnerable to the virus than others.
Economists at Barclays don’t forecast any impact of coronavirus on US economic growth. With relatively few cases and low dependency on China’s economy they consider the dollar a very attractive investment.
Today there is no high impacting US data. Investors will be looking ahead to tomorrow’s consumer confidence and GDP and durable goods data later in the week.