USD/PKR Outlook:
The USD/PKR exchange rate is likely to move sideways as it currently sits near its 90-day average. Despite heightened geopolitical tensions boosting USD demand, this is countered by some positive developments for the PKR.
Key drivers:
• Rate gap: The Federal Reserve's policies are keeping USD strong, while Pakistan's central bank aims to stabilize the PKR through structural reforms.
• Risk/commodities: Oil prices have surged due to geopolitical tensions, increasing global demand for USD as oil is priced in that currency.
• One macro factor: Ongoing geopolitical risks, particularly between the US and Iran, may weigh on the PKR's performance.
Range:
USD/PKR is expected to drift within a stable range as it has recently traded closely to its average.
What could change it:
• Upside risk: A further escalation in geopolitical events could drive more investors into USD.
• Downside risk: Effective local economic reforms and increased defense exports could strengthen the PKR against the USD.
