Intraday Update: Rupee’s Strong Performance Against US Dollar

The Pakistani rupee gained 0.39% against the US dollar during the first hours of trade in the interbank market on Tuesday.

At 10:15 a.m., the rupee was trading at 285.65, up Rs1.11 on the interbank market.

The rupee gained 0.34% on Monday to close at 286.76.

In a noteworthy development, Pakistan’s headline inflation in September was 31.4% year on year, according to the Pakistan Bureau of Statistics (PBS), substantially higher than the reading in August, which was 27.4%. It was 2% higher month over month.

“The strengthening of the PKR against the US dollar is expected to play a mitigating role, offering some relief from inflationary pressures,” Arif Habib Limited (AHL) stated in a research.

Pakistan’s trade imbalance also shrank, owing mostly to import reductions, as pressure on the country’s foreign exchange reserves eased.

Globally, the US dollar held on to new highs on Tuesday, pushing the yen closer to the intervention zone, as strong US economic data supported expectations that the Federal Reserve will maintain interest rates higher for longer.

According to a poll released on Monday, US manufacturing took a step closer to recovery in September, as production increased and employment increased. Prices paid for inputs by manufacturers also fell significantly.

Rising US Treasury yields also helped the dollar, as better-than-expected economic data supported Fed rate hikes for the foreseeable future, while a last-minute deal to avoid a government shutdown decreased demand for US debt.

The dollar index climbed 0.5% to 107.06, reaching a high of 107.12 at one point, its best since November 2022.

Oil prices, a crucial measure of currency parity, fell 1% in early Asian trade on Tuesday, after hitting a three-week low the previous session, due to a stronger US dollar, rising US bond yields, and uncertain supply signs.

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