• Pakistan’s trade deficit spikes to $572 million in April vs $9 million in March
  • Pakistan exports drop 25% in April
  • Risk off trading amid rising US – Chinese tensions boosts USD
  • At 10:15 UTC, USD/PKR +0.4% at 161.20 >> Real time exchange rate

The Pakistani Rupee is edging lower versus the US Dollar for a second straight session at the end of the week. The Pakistani Rupee settled on Thursday -0.05% lower at 160.57.

At 10:15 UTC, USD/PKR is trading +0.4% higher at 161.20. This is the upper end of the daily traded range of 160.57 – 161.20.

The Pakistani Rupee is losing ground following the release of current account data. Pakistan’s current account deficit, which calculates the difference between the country income and expenditure spiked to $572 million in April. This is 64 times the current account reading for March, which was $9 million.

A sharp drop in exports is being blamed for the widening of the deficit in April. Exports plunged by 25% to $1.39 billion last month, compared to $1.82 billion in March as foreign demand for goods evaporated amid the coronavirus lockdown.

Despite the widening deficit, economists still consider it to be under control and affordable owing to Pakistan’s increase in foreign reserves. Foreign currency reserves have increased to above $12 billion following an emergency $1.5 billion loan from the International Monetary Fund (IMF) last month, to fight the coronavirus crisis.

A souring mood in the market is also weighing on demand for the Pakistani Rupee and boosting the safe haven US Dollar, as relation between US and China cool further.

China is reportedly planning to impose a new security law, entering it directly into the Hong Kong constitution, bypassing the territory’s Legislative Council. The move by China to limit freedom in the financial hub of Hong Kong risks the return of pro-democratic protesters and a response from the White House.

Trump warned China not to press ahead with the plans. Sanctions are already being drawn up.

Today’s elevation in tensions comes after a week of rising frictions between the two powers over trade and as Trump continues in his efforts to pin the blame for coronavirus on China.

There is no high impact US data today. Investors will continue to monitor US – Chinese relations closely as the week long annual Chinese parliamentary session kicks off in Beijing.

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