PTBP Web Desk
The Pakistani rupee made modest gains against the US dollar in the opening hours of trading on Thursday, marking a 0.1% appreciation in the inter-bank market. At 10 am, the rupee was trading at 278.45, a gain of Re0.27 from its previous close of 278.72 on Wednesday, as reported by the State Bank of Pakistan (SBP).
US Dollar Performance
Globally, the US dollar maintained its upward trajectory, bolstered by rising Treasury yields. This surge put pressure on other major currencies including the yen, sterling, and euro, which were seen hovering near multi-month lows. The international market’s focus in 2025 has been heavily centered on the anticipated policies of US President-elect Donald Trump as he prepares to reassume office on January 20. Analysts predict that his policies might stimulate economic growth but also contribute to inflationary pressures.
Trump’s Policy Impact
The potential for new tariffs has been a significant talking point. CNN reported on Wednesday that Trump is contemplating declaring a national economic emergency to justify imposing universal tariffs. This news follows a report from The Washington Post on Monday about nuanced tariffs, which Trump later denied. These policy uncertainties have led to fluctuations in currency markets, with the dollar index, which measures the US currency against six others, standing at 109.03, close to a two-year peak. Last year, the index saw a 7% gain as markets adjusted to expectations of a slower pace in US rate cuts.
Federal Reserve’s Stance
The Federal Reserve’s recent decision to project only two rate cuts for 2025, down from an earlier prediction of four, has further influenced market dynamics. This adjustment reflects concerns over inflation and the possible impacts of Trump’s administration policies, showing how domestic US economic strategies ripple through global markets.
Oil Prices and Currency Parity
Oil prices, a critical factor in currency valuation, experienced a decline on Thursday. This drop extended losses from the previous day, primarily due to a significant increase in US fuel inventories last week. However, the decline was somewhat mitigated by concerns over supply constraints from OPEC nations and Russia. Brent crude futures decreased by 28 cents, or 0.4%, to $75.88 a barrel, while US West Texas Intermediate crude futures fell by 30 cents, or 0.4%, to $73.02. Both benchmarks had already shed over 1% on Wednesday, affected by a stronger dollar and unexpected rises in US fuel stockpiles.
Implications for Pakistan
For Pakistan, the slight strengthening of the rupee against the dollar comes at a time when the country is navigating through its own economic challenges. The appreciation of the rupee could be seen as a positive sign for import costs, which are predominantly dollar-denominated, potentially easing inflationary pressures in the short term. However, the broader global context of a strong dollar and fluctuating oil prices suggests that the rupee’s gains might be temporary unless backed by robust domestic policy measures or external economic developments.
