The Pakistani Rupee is extending losses versus the US Dollar on Monday. After losing ground to the safe haven US Dollar last week the Pakistani Rupee remains out of favour, despite strong easing action by the US Federal Reserve on Sunday.
At 10:30 UTC USD/PKR was trading at 158.30 after opening the session at 157.05. The pair trades towards the upper end of the daily range of 157.05 – 158.7.
Riskier Pakistani Rupee Declines
The Pakistani Rupee remains on the back foot as investors continue to move out of risker assets. Strong risk aversion in the financial markets comes as coronavirus fears escalate. Data out from China overnight shows the dire impact that the virus is having. Chinese industrial output fell to the lowest level on record in the first two months of the year, whilst urban unemployment hit its highest rate ever as coronavirus paralysed China and brought the world’s second largest economy to a halt.
China is a principal trading for Pakistan. Any economic slowdown in China will have a spill over effect on the Pakistan economy.
More countries are closing their borders, more people are in lockdown, isolation or quarantine and businesses across the globe are coming to a standstill. This is resulting in investors taking money out of riskier assets or currencies, such as the Pakistani Rupee and moving it towards safe havens.
Fed Takes Action (again)
Risk aversion continues despite the US Federal Reserve cutting interest rates by 100 basis points on Sunday. This was the second time that the Fed has cut rates in a week. Interest rates now sit between 0% – 0.25%. The Federal Reserve also restated its bond buying programme, pledging to purchase $700 billion in treasuries. Furthermore, the US central bank said it will lower bank’s capital ratio requirement to 0%.
These are all moves that will help prevent any blockages in the financial system. However, they haven’t stemmed the level of fear in the market. The US stock market is expected to open another 5% lower today.