Bias: Bearish-to-range-bound, as the current level is below the 90-day average and sits in the lower half of the 3-month range.
Key drivers:
• Rate gap: The Saudi central bank’s fixed exchange rate to the US dollar provides stability, while the Pakistani central bank faces depreciation pressures.
• Risk/commodities: Oil prices have experienced volatility recently, which may impact the SAR positively due to Saudi Arabia's oil dependency.
• Inflation outlook: Pakistan is dealing with inflation projections averaging 4.4% in fiscal year 2026, which could pressure the PKR further.
Range: The SAR/PKR pair is likely to drift within the recent range, with potential testing of the lower end given current pressures on the PKR.
What could change it:
• Upside risk: A significant rise in oil prices could strengthen the SAR and encourage a cautious uptick.
• Downside risk: Continued depreciation of the PKR against the US dollar could intensify, impacting the SAR/PKR exchange rate negatively.