After slipping 0.8% at the start of the week, the Pakistani Rupee is holding steady versus the US Dollar on Wednesday, for a second straight session.
At 10:15 UTC, USD/PKR is trading at 166.35 as investors digest weaker inflation in Pakistan and look ahead to US manufacturing data later today.
Pakistan Inflation Drops to 10.2%
Pakistan’s consumer prices inflation (CPI) slowed to 10.24% in March year on year, a 7-month low. CPI is down from 12.4% in February. The drop in inflation comes as the price of food and fuel declined.
International oil prices have collapsed in March, tumbling from $50 per barrel at the beginning of the month to just $20 dollars today. The coronavirus outbreak has seen future demand expectations drop sharply. Meanwhile, Saudi Arabia and Russia have hiked production and slashed prices in order to gain market share. The lower oil prices translate to lower fuel prices and put downward pressure on inflation.
The weaker inflation figures in Pakistan come after the Sate Bank of Pakistan slashed interest rates to 11% last week.
High interest rates had helped attract $3.4 billion in government debt securities, boosting official foreign exchange reserves. However, these reserves have been sliding this month after $2 billion of foreign money was withdrawn as to the end of last week.
The Federal government is in the process of calculating the economic damage that the coronavirus outbreak is expected to cause to the Pakistan economy. An independent assessment by a former finance minister and a former central bank governor has projected a fall in GDP in the region of 4.6% – 9.5%.
US Manufacturing Data In Focus
The US Dollar is trading broadly higher versus its peers as flows into safe havens are on the rise. President Trump warned that the US could see 240,000 deaths from coronavirus. The horrifying figure has unnerved investors sending them in search of safe havens.
Investors will now turn their attention to US ISM manufacturing data due for release later today. Analysts are expecting activity in the sector to have contracted in March amid the coronaviris outbreak. Some factories decided to close, although this hasn’t been imposed by the US government.
