The USD to PKR exchange rate has been subject to significant influences from both US economic conditions and local developments in Pakistan. Recent forecasts indicate that the US dollar is weakening broadly due to rising expectations for Federal Reserve interest rate cuts in 2026. Analysts note that the dollar has been under pressure following a dovish rate cut from the Fed, with new jobless claims indicating potential economic softness. The USD has reached 90-day lows near 280.2 PKR, just below its three-month average of 282 PKR, indicating a stabilized trading range amid fluctuating sentiment.
The downward pressure on the dollar is further enhanced by mixed US economic data that reflects a cooling economy, particularly in manufacturing and consumer spending, but with a still-resilient labor market. As futures markets price in multiple rate cuts beginning as soon as March 2026, a dovish Fed is anticipated to narrow interest-rate differentials, thereby diminishing the dollar's yield advantage. This trend, alongside the stabilizing fortunes of other major currencies, suggests limited upside for the dollar in the near term.
Conversely, the Pakistani rupee's trajectory remains troubled due to ongoing geopolitical tensions and economic challenges. The PKR has depreciated by 12% against the dollar since the start of 2025, with further declines anticipated, as analysts predict it could approach 100 PKR/USD by year-end. The State Bank of Pakistan has intervened in the interbank market to support the rupee, purchasing significant amounts of dollars to bolster reserves, though this could create artificial demand and potentially mask underlying weaknesses.
Moreover, heightened geopolitical tensions, along with economic reforms backed by the IMF, are crucial for influencing the PKR's stability. While the central bank's higher interest rates may attract foreign inflows, they also add stress to domestic borrowing. Analysts emphasize that the imposition of stricter regulations to combat currency smuggling has provided temporary support for the PKR; however, the broader political and economic landscape poses ongoing risks.
In summary, the USD to PKR exchange rate outlook is clouded by a weakening dollar influenced by Fed policy shifts, alongside a struggling Pakistani rupee facing external pressures and internal economic reforms. Monitoring upcoming economic data releases from both the US and Pakistan will be vital to gauge shifts in this dynamic currency pair.
