PKR Slides Marginally as Global Dollar Strengthens on Geopolitical Risk
The Pakistani rupee (PKR) started the week with a marginal depreciation of 0.02% against the US dollar, slipping by Re0.04 to settle at 283 during the early hours of trading on Monday.
This weakening trend follows last week’s Re0.79 (0.28%) drop, where the rupee had closed at 282.96 per USD, compared to 282.17 the week prior, according to the State Bank of Pakistan (SBP).
Global Risk Aversion Lifts US Dollar
The US dollar firmed against major global currencies as investors sought safety amid intensifying Israel-Iran hostilities. The possibility of further escalation — including fears that Iran might block the Strait of Hormuz, a critical global oil transit chokepoint — has raised the risk premium on global markets.
The greenback gained:
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0.14% to 144.3 Japanese yen
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0.14% against the euro, which fell to $1.1534
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Held steady at 0.81 versus the Swiss franc
An index measuring the USD against six major currencies remained stable at 98.25, signaling broad-based support for the dollar as a safe-haven asset.
Oil Prices Fuel Economic Uncertainty
As a major oil-importing economy, Pakistan remains sensitive to crude price fluctuations — and Monday’s gains in oil prices add pressure to the rupee. Both major benchmarks extended Friday’s rally:
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Brent crude rose $1.12 (1.5%) to $75.35/barrel
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WTI crude gained $1.10 (1.5%) to $74.08/barrel
These follow a 7% surge on Friday, driven by fears that Middle East turmoil could disrupt global oil flows, particularly through the Strait of Hormuz, through which over 18 million barrels/day of oil transit.
Forex Markets Bracing for a Packed Central Bank Week
While geopolitical headlines dominate, markets are also closely watching global central banks, especially the U.S. Federal Reserve, which is expected to hold rates steady during its upcoming policy meeting on Wednesday.
Key considerations include:
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Updated dot plot guidance
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Any hint on the timing of potential rate cuts
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Sensitivity to inflation risks driven by higher oil prices
“Until there’s more clarity on inflation trajectory and geopolitical resolution, emerging market currencies like the PKR will likely remain under pressure,” noted a forex strategist.
Year-to-Date: PKR Faces Structural Headwinds
So far in 2025, the rupee has lost over 9% in value, weighed down by:
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Structural trade deficits
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Rising import costs due to oil
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Sluggish foreign investment inflows
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Delays in reforms and privatization drives, like the ongoing PIA privatization process
Despite support from the IMF’s $7 billion programme, investor confidence remains fragile as the government navigates a complex fiscal and geopolitical landscape.
Investor Watchlist: What’s Next for the PKR?
The near-term direction of the rupee will hinge on:
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Geopolitical escalation or de-escalation in the Middle East
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Crude oil price trends and their impact on Pakistan’s trade balance
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Federal Reserve and other central bank signals on interest rates
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Domestic political and fiscal clarity, especially as the FY26 budget implementation begins
Conclusion: Minor Decline Reflects Deeper Uncertainty
While the PKR’s 0.02% dip might seem small on the surface, it is indicative of broader market unease. With safe-haven demand for the USD rising, and oil prices adding to inflationary risks, the Pakistani rupee remains exposed to both domestic and global shocks. Unless investor sentiment improves, further volatility cannot be ruled out.
