Risk aversion across the global financial markets has resulted in the Pakistani Rupee declining against the US Dollar for five straight sessions. The USD/PKR started the week at 154.25 and is trading at 10:00 UTC on Friday at 159.30. The US Dollar Pakistani Rupee touched a 6 month high in early trade on Friday, at 159.45.
Pakistani Rupee Lower On Risk Aversion
Fears surrounding coronavirus and the economic impact that it will have on the global economy have weighed on riskier currencies across the week. Global markets have seen huge swings as investors grapple to price in the escalating economic disruption from coronavirus and as central markets step in, in a bid to support their markets and economies.
Several central banks have announced measures to bring calm and stability. Today the Norwegian central bank cut interest rates, the Bank of Japan brought billions of dollars of Japanese government bonds and the Reserve Bank of Australia injected $5.5 billion into the financial system. Yesterday the ECB added to its bond buying programme and earlier in the week the Bank of England cut interest rates.
These moves, combined, have started to ease market fears on Friday, although some riskier currencies such as the Pakistani Rupee are still trading on the back foot.
US Dollar Awaits Government & Fed Support
The US Dollar is pushing higher across the board on Friday, extending gains from a steep jump in the previous session as investors continued to buy the dollar for its safe haven properties. Despite policy makers making big moves to shore up the global financial system, investors are doubting whether it is enough.
Washington is still very quiet as far as serious fiscal policy is concerned. Whilst Trump announced a travel ban and some measures on Wednesday, investors are waiting for a stronger fiscal response. There are rumours circulating that the Democrats and Republicans will get something through Congress today.
In the absence of any fiscal policies investors are also looking ahead to the Federal Reserve’s scheduled policy meeting next week. According to the CME Fedwatch market participants are growing increasingly convinced that the Fed will slash rates by 100 basis points in March and restart QE.