In recent forecasts, analysts have observed a weakening trend in the US dollar (USD), primarily driven by expectations of aggressive Federal Reserve rate cuts in 2026. Following a surprising drop in US inflation from 3% to 2.7%, the USD has experienced selling pressure. Market participants are anticipating the onset of multiple rate cuts as early as mid-2026, which is likely to diminish the USD's yield advantage and add further downward pressure on its value.
In Pakistan, the currency situation is complicated by a number of factors. Geopolitical tensions, particularly ongoing border disputes, have contributed to a significant depreciation of the Pakistani Rupee (PKR), which has fallen by approximately 12% against the USD since the beginning of 2025. Analysts predict a further decline, projecting the exchange rate could reach 100 PKR/USD by year-end. This depreciation is exacerbated by economic instability and the challenges stemming from political unrest.
Despite this, the State Bank of Pakistan has intervened to support the PKR, purchasing $9 billion in foreign reserves to create artificial demand. Additionally, efforts to curb currency smuggling and black market activities, which have historically undermined the PKR, have led to some temporary strengthening of the currency. However, the ongoing impact of geopolitical tensions and a reliance on foreign inflows, influenced by IMF-backed reforms, complicate the outlook.
Recent data indicates that the PKR/USD exchange rate is currently at near 7-day lows around 0.003568, sitting just slightly above its three-month average of 0.003549. The exchange rate has maintained a stable range, trading within a 1.5% bandwidth between 0.003520 and 0.003574. This stability reflects the juxtaposition of the weaker USD and the internal challenges facing the PKR.
In summary, while the USD is expected to face continued pressure due to imminent rate cuts, the PKR is also navigating a precarious landscape marked by geopolitical risks and economic reforms. As such, businesses and individuals engaging in international transactions should remain vigilant and consider these developments when planning for currency conversions.
