HKD/PKR Outlook: Slightly positive, but likely to move sideways, as the rate is close to its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority's interventions to maintain the HKD's peg to the US dollar have created a significant interest rate differential compared to the State Bank of Pakistan's higher policy rate.
• Risk/commodities: Recent appreciation of the PKR against the US dollar indicates improved market confidence, although overall currency trends remain mixed.
• One macro factor: Fitch Ratings' forecast predicts continued weakening of the PKR due to anticipated current account pressures, which could influence the exchange rate dynamics.
Range: The HKD/PKR is expected to hold its current position, fluctuating within the recent 3-month range.
What could change it:
• Upside risk: A shift in the HKMA's monetary policy to increase rates could support the HKD.
• Downside risk: Further deterioration in Pakistan’s external accounts could put additional pressure on the PKR.