- Risk aversion amid persistent coronavirus fears sends Pakistan Rupee to all time low of 168.45
- Rupee under pressure as companies’ close books for end of financial year
- Safe haven US Dollar gains across the board, despite encouraging economic data
- US Dollar Pakistani Rupee exchange rate (USD/PKR) on track to gain 3.3% across June, the largest monthly gain since March.
The US Dollar Pakistan Rupee exchange rate trades +0.4% at 167.60 as risk sentiment continues to drag on the riskier currency.
Fears of a second wave of coronavirus is pulling risk sentiment lower across the global financial markets on Tuesday, dragging on riskier assets and currencies, such as the Rupee whilst lifting demand for the US Dollar.
The World Health Organization has warned that the second wave of coronavirus could be worst than the first. The announcement came as spikes in coronavirus numbers across the globe are resulting in governments implementing localised lock down measures and rolling back reopening measures in order to stem the spread of the virus.
The fall of the Rupee comes despite Pakistan receiving $1.75 billion in fresh loans from financial institutions last week, in addition to $1.3 billion in loans from the Chinese government on today. This brings the official foreign inflows to $3 billion since the 23rd June.
Broadly speaking there is a low supply of US Dollar in the local market compared to high payments out being made by the Pakistani Government for loans. Furthermore, today is the end of the financial year, so demand for US Dollar has been elevated as companies try to close their financial books for the year end. Some analyst believe that the Rupee could gain ground in early July.
The US Dollar is pushing higher across the board owing to its safe haven properties. Investors have now shrugged off yesterday’s impressive US pending home sales which boosted sentiment surrounding the US economy.
Attention will now turn towards US Federal Reserve Chairman Jerome Powell’s speech later today. This comes after Jerome Powell warned of an extraordinarily uncertain economic recovery. A very cautious sounding Powell could unnerve the markets further, boosting the US Dollar.