pakistani rupee bank notes
  • Pakistan Rupee (PKR) has been supported by a strong uptick in domestic equities
  • Oil prices fall on OPEC’s failure to extend oil cuts
  • US Dollar (USD) trends lower on safe haven outflows as Moderna seeks vaccine authorisation
  • Federal Reserve could ease policy in December

The US Dollar Pakistan Rupee (USD/PKR) exchange rate is on the rise on Tuesday, snapping a five day losing streak. The pair settled on Monday -0.13% at 158.80 at the low of the day. At 10:15 UTC, USD/PKR trades +0.5% at 159.57.

The Pakistan Rupee has had a good run over the past week as it traces the domestic stock market higher, whilst weaker oil prices also offer support.

The Karachi 100 benchmark index rallied 1.5% higher across the previous week and trades 2% higher so far this week. Rising risk sentiment on the back of vaccine developments has boosted demand for riskier assets and currencies, lifting the Karachi 100 and boosting demand for the Pakistan Rupee.

Meanwhile oil prices are under pressure this week, battling $45 after OPEC+ members failed to reach an agreement over extending oil production cuts. Talks will be extended over the coming days which is likely to keep oil on the back foot. Failure to agree a deal will see oil production increase by 2 million barrels a day at a time when travel restrictions and lockdown measures across the globe are likely to be dragging on demand.

Meanwhile the US Dollar is trading lower versus its major peers. The US Dollar Index which measures the greenback versus a basket of major peers continues to trade at 2.5 year lows. Covid vaccine news and the expectation of more monetary easing pulled on demand for the US Dollar.

Moderna announced that it applied for US and UK emergency vaccine authorisation after final results revealed its vaccine was 94.1% effective.

Market participants are increasingly expecting the US Federal Reserve will ease monetary policy when it meets in December to help ease the fallout from covid on the US economy. Federal Reserve Chair Jerome Powell said that vaccine developments are very positive for the medium-term outlook. However he added that the economy remains damaged and in an uncertain state.

Looking ahead, Fed Powell will testify, US ISM manufacturing data will also be in focus.