- Pakistan Rupee (PKR) rises on risk on sentiment amid vaccine optimism
- Pakistan domestic activity indicators are starting to improve
- US Dollar (USD) declines on risk outflows & improving US political clarity
- US data drop includes FOMC minutes, GDP, durable goods and initial jobless claims
The US Dollar Pakistan Rupee (USD/PKR) exchange rate is extending losses for a second straight session on Wednesday. The pair settled -0.25% lower on Tuesday at 160.30. At 10:15 UTC, USD/PKR trades -0.7% at 159.2, at the lower end of the daily traded range.
The Governor of the State Bank of Pakistan Reza Baqir has said that “there is light at the end of the tunnel” for the Pakistan economy. Mr Baqir said that the Monetary Policy Committee noticed that domestic activity indicators are starting to pick up. For example, automobile sales are above pre-covid pandemic levels and cement sales are at a record level suggesting that the economy is gaining traction.
However, he also noted that headwinds are also picking up as covid cases in Pakistan are once again increasing and cases worldwide continue to surge.
The SBP expects the economy to grow by around 2% this fiscal year which ends in July 2021. Mr Baqir said that he expects the recovery to be led by the construction and housing sector.
Also supporting the Rupee is a broad upbeat mood in the market as vaccine news from earlier in the week continues to support risk sentiment. As a result, investors are buying into riskier assets and currencies such as the Rupee, whilst selling out of the safe haven US Dollar.
Adding to the risk on mood are signs that outgoing President Trump’s administration has started cooperating with the transition to a Joe Biden Presidency. Reports that Janet Yellen could become the next US Treasury Secretary are also boosting the mood, given that Yellen is considered a market friendly choice.
Looking ahead, there is a barrage of US economic data which is due to be released later in the session ahead of Thursday’s Thanksgiving holiday. These include the minutes to the latest FOMC meeting, durable goods, jobless claims and GDP data.