• Pakistan Rupee (PKR) declines for third session
  • SBP monetary policy decision due later this week
  • US Dollar (USD) falls versus major peers
  • Janet Yellen to speak in US session

The US Dollar Pakistan Rupee (USD/PKR) exchange rate is advancing on Tuesday, extending gains for a third straight session. The pair settled +0.1% higher on Monday at 160.25. At 10:15 UTC USD/PKR trades +0.4% at 160.75.

The Pakistan Central Bank monetary policy meeting is expected at the end of the week. Expectations are for the status quo to be maintained. At the last MPC meeting only 1 of the 9 policy members voted for a 25 basis point hike. Whilst more policy member could vote for a hike in January and March, it is unlikely to become the majority just yet.

Whilst imports have picked up passing $5 billion a month. However, inflation has eased amid a correction in food prices, covid cases are on the rise and the absence of the IMF is likely to see the doves dominate.

Pressures to raise interest rates are expected to build when the current account stays in deficit for a few months, when inflation pushes over 9% and when the IMF programme is back on.

The US Dollar is trading higher versus the Pakistan Rupee, however it is moving lower versus its major peers. The US Dollar Index -0.3% at 90.48 in the European session ahead of a testimony by US Treasury Secretary Janet Yellen on Capitol Hill later today.

Former Federal Reserve Chair Janet Yellen is expected to be supportive of President elect Joe-Biden’s proposed $1.9 trillion covid stimulus package. Janet Yellen is expected to outline the need for big fiscal stimulus action.

Janet Yellen is also expected to be asked about her stance on the US Dollar. Whilst Yellen is likely to be a vocal supporter of a stronger US Dollar the US Dollar is not expected to rise given that the ultra lose monetary policy stance is expected to stay for the coming few years.