The recent outlook for the USD to PKR exchange rate reflects a mix of elements influencing both currencies. Analysts noted that the US dollar (USD) has seen a significant softening due to a surprising drop in US inflation from 3% to 2.7% in November. This decline has increased expectations that the Federal Reserve may implement aggressive rate cuts as early as 2026, thus diminishing the USD's yield appeal. The US Dollar Index (DXY) has retreated from its recent highs, signaling a potential range-bound trading environment until the next indicators from the Fed are released.
On the other side, the Pakistani rupee (PKR) has been under considerable pressure, depreciating approximately 12% against the USD since the beginning of the year. This decline is primarily attributed to ongoing geopolitical tensions and market volatility. Experts predict that if these tensions persist, the PKR could further decline to around 100 PKR/USD by year-end. However, the State Bank of Pakistan’s intervention in the currency market, buying $9 billion to support the rupee, has created some temporary demand, though this may not be sustainable.
Moreover, the crackdown on currency smuggling and black market activities has led to some strengthening of the PKR recently. Yet, the broader economic context reveals that while the IMF-backed reforms aim to stabilize the currency, they come with challenges such as high domestic borrowing costs stemming from increased interest rates.
At present, the USD to PKR rate hovers around 280.3, close to its 7-day high and only 0.5% below the three-month average of 281.7. The currency pair has traded within a stable range of 1.5%, between 279.8 and 283.9. Going forward, analysts suggest watching the upcoming economic data releases from the US and any developments in regional geopolitical conditions, as these will significantly impact the certainty and volatility around the USD/PKR exchange rate.
