Dollar nosedives to 10-month low against Pakistani Rupee

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US Dollar (USD) slid down broadly yesterday against the Pakistani Rupee (PKR), dragging the USD/PKR to 97.61, the lowest level in more than 10 months despite the tapering decision from the Federal Reserve.

Technical Analysis

The pair is being traded around 97.84 at 9:50 GMT in London. Support may be noted near 97.42 that is the low of April last year ahead of 97.12, the low of January 2013. A daily closing below the 97.00 handle shall expose the 96.70 and then 96.20 milestones.

On the upside, resistance can be seen around 98.00, the psychological level, and then 99.37, the high of the previous upward wave. The pair might hold a range between 97.00 and 100.00 for a long period of time as the State Bank of Pakistan (SBP) is taking revolutionary steps to stabilize its currency.

$1.5 Billion Assistance from Saudi Arabia

Saudi Arabia –often termed as the “all-weather friend” in Pakistan—donated $1.5 billion to the south Asian nation after Prime Minister Nawaz Sharif’s meeting with the Saudi Prince this month. The dollar crashed from nearly $106 to less than $98 following the rapid rise in the foreign reserves.

Peace Talks

Peace talks between the government and Taliban are moving in the right direction, according to the head of the negotiating committee. Optimism regarding the law and order situation is also being considered a main reason for the recent appreciation in the Pakistani Rupee (PKR).

Pakistan’s Inflation Data

On Tuesday, April 01, Pakistan Bureau of Statistics (PBS) is scheduled to release the monthly inflation report for the month of March. According to the median projection of different analysts, inflation in Pakistan jumped to 9.74% in March as compared to 7.9% in the same duration of the year before. Generally speaking, low inflation is considered good for the emerging-market economies like Pakistan; hence better than expected actual outcome will be considered bearish for USD/PKR and vice versa.

Unprecedented Steps

The government of Pakistan is taking unprecedented steps to stabilize its currency. The steps include halting the smuggling of the foreign currencies to Dubai via Sea, finalizing the auction of cutting-edge fourth generation (4-G) telecom license, and acquisition of loans from the International Monetary Fund (IMF) and Islamic Development Bank (IDB).

US Durable Goods Data

Tomorrow the US Census Bureau is due to release the February data for the sales of durable goods i.e. commodities which last for three years or longer time period. According to the median projection of economists, sales of durable goods increased to 1% in February compared with 1.1% decline in the month before. Better than expected actual outcome will be seen as bullish for USD/PKR and vice versa.

Conclusion

USD/PKR is expected to hold range around the pre-2013 levels for a longer period of time amid political stability, improving law and order situation and increasing foreign reserves. 

To contact the writer of this story: Usman Ahmed at usman@forexminute.com