- Shopping prior to Eid considerably down on previous years
- Pakistani Rupee (PKR) drops as risk appetite declines on souring US – China relations
- Safe haven US Dollar (USD) rises as Trump threatens retaliation
- At 10:15 UTC, USD/PKR is +0.1% at 161.20 >> Real time exchange rate
The Pakistani Rupee is edging lower versus the US Dollar on Wednesday in quiet public holiday trading. Pakistan remains closed in observance of the third day of celebrations for Eid ul-Fitr.
At 10:15 UTC, USD/PKR was trading +0.1% at 161.20 on broad dollar strength, paring losses from the previous session which saw the Pakistani Rupee gain 0.1% versus the US Dollar.
Pakistani Rupee is under pressure amid reports that spending for Eid was considerably down on previous years. The shopping frenzy which is seen most years prior to the Eid ul Fitr celebrations has not materialised as people stay away from market places in the wake of the coronavirus crisis.
The 2 months, government-imposed lockdown to stem the spread of covid-19 has meant that consumers purchasing power was greatly reduced. The economic impact of the lockdown is becoming increasingly more apparent.
The Pakistan economy is on track for its first contraction in 68 years. However, on a positive note, the Governor of the State Bank of Pakistan is confident that the Pakistan economy will stabilise once the coronavirus outbreak is overcome.
Also adding pressure to the Rupee was a broad risk off sentiment in the forex markets. Intensifying tensions between China and the US is weighing on risk appetite, boosting demand for the safe haven US Dollar, whilst dragging the riskier Pakistan Rupee lower.
The US has said that it is considering a range of actions and sanctions on Chinese officials, businesses and financial institutions over the crackdown on liberties in financial hub Hong Kong. The White House warned that Hong Kong could lose its title as Asia’s financial hub if the national security measures being pushed by China come into force.
The latest US – China developments damped the risk rally from the previous session, which saw riskier currencies advance and the US Dollar sink as covid-19 vaccine hopes and economic recovery optimism drove the foreign exchange markets.
