• Pakistan Rupee (PKR) declines to three week low
  • SBP expect GDP FY21 1.5% – 2.5%
  • US Dollar (USD) rising on safe haven flows as covid cases surge
  • Absence of fiscal stimulus could see Fed act

The US Dollar Pakistan Rupee (USD/PKR) exchange rate is extending gains for a second straight session on Thursday. The pair settled +0.4% higher on Wednesday at 158.50.  At 12:15 UTC, USD/PKR trades +1.2% at 160.38, its highest level in 3 weeks.

The State Bank of Pakistan (SBP) expects the country’s GDP to achieve growth of between 1.5% – 2.5% in the current fiscal year. The central bank set the target of 2.1%. However, the SBP warned that this could be subject to change demanding largely on the evolution of the covid pandemic, external demand  and progress in reforms.

The SBP said that they expect a solid performance from agriculture and a recovery in the service sector, particularly in the finance sector, insurance, and communications. The Industrial sectir is expected to see a modest recovery thanks to a pick up in large scale manufacturing.

The US Dollar is pushing higher across the board as recent vaccine optimism fizzles. Instead soaring covid infections and fears of tighter lockdown restrictions are dragging on risk sentiment, boosting demand for the US Dollar as investors seek out its safe haven properties.

In the US, the number of covid deaths reached 250,000 on Wednesday, meanwhile the number of people hospitalised struck 78,000, a record high. The spread of covid in America’s 3rd wave has prompted tighter restrictions in states such as Michigan, Washington and California. New York has also shut schools.

With lockdown restrictions tightening and Congress failing to make any progress over an additional fiscal stimulus bill, it is likely that the Federal Reserve will need to step in again to ease monetary policy in order to support the economy. Speculation is growing that the US central bank will expand its bond buying programme in December.