On Monday, the Pakistani rupee experienced a slight depreciation against the US dollar, losing 0.04% in the inter-bank market. The local currency closed at 280.57, reflecting a loss of Re0.10 against the greenback. This decline marks a continuation of the rupee’s weakness from the previous week, when it depreciated by 0.11%, losing Re0.31 in the inter-bank market. The rupee had closed the previous week at 280.47, down from 280.16 against the dollar, as reported by the State Bank of Pakistan (SBP).
This past week was a shortened trading week due to the Eid-ul-Fitr holidays, with the currency market being closed from Monday to Wednesday. As a result, trading was limited to just the final two days of the week. Despite the limited trading activity, the currency still reflected a subtle downward movement, mirroring broader trends in the global markets.
Internationally, the US dollar continued to struggle amidst growing concerns about the global economy and escalating trade tensions between the United States and China. Investors flocked to safe-haven assets such as the Japanese yen and Swiss franc, while selling off risk-sensitive currencies like the Australian dollar. This shift in investor sentiment was triggered by the fallout from US President Donald Trump’s aggressive tariff measures, which have raised fears of a global recession. Asian stock markets and US futures markets both witnessed significant declines as the market rout deepened.
The US dollar, which typically serves as a safe-haven asset, was down 0.45% against the yen at 146.21, though it recovered slightly after a more substantial loss earlier in the day. Similarly, the Swiss franc saw a notable 0.6% jump, extending a 2.3% surge against the US dollar from the previous week. Both the yen and the Swiss franc have emerged as key beneficiaries of the uncertainty surrounding Trump’s new tariff policies, which have rattled global markets.
Trump’s tariff announcements had a profound impact on US stock markets, erasing nearly $6 trillion in value last week. In response to the market’s reaction, Trump suggested that such market corrections were necessary and that, in his view, “sometimes medicine is needed to fix things.” Meanwhile, China, in retaliation, imposed additional tariffs of 34% on all US goods, escalating tensions between the two largest economies in the world.
Despite the turmoil surrounding the US dollar, global assets like government bonds and gold saw gains as investors sought safer havens. The US dollar’s typical status as a safe-haven asset seemed to be eroding as uncertainty regarding the impact of the tariffs on US growth mounted.
Against a basket of major currencies, the US dollar remained relatively unchanged at 102.81 after a 1% drop last week. Meanwhile, the ongoing volatility in the oil market added to global economic concerns. Oil prices, a key indicator of currency parity, continued to slide, with Brent and WTI crude benchmarks both falling 3% on Monday. Brent crude futures lost $1.94, or 3%, to settle at $63.64 a barrel, while US West Texas Intermediate (WTI) crude futures dropped $1.94, or 3.1%, to $60.05.
The drop in oil prices follows a turbulent week in which Brent and WTI crude lost 10.9% and 10.6%, respectively. These losses have been driven by heightened fears of a global recession, stoked by trade tensions between the US and China, and concerns that an impending supply increase by OPEC+ could exacerbate the global oversupply of oil.
In conclusion, while the Pakistani rupee experienced only a modest decline against the US dollar on Monday, the currency’s performance is closely tied to the broader economic and geopolitical developments affecting global markets. With trade tensions escalating and the prospect of a global recession looming, the outlook for emerging market currencies, including the Pakistani rupee, remains uncertain. Investors will continue to monitor these factors, which will likely play a pivotal role in the rupee’s future trajectory.