At the Gates of Stability — or Chaos

Mehmed the Conqueror
Sultan Mehmed II pulled off what many before him couldn’t. At just 21, he broke through the walls of Constantinople—ending centuries of Byzantine rule and making way for a new chapter in Muslim history. His victory wasn’t about luck. It was planning, patience, and pulling the trigger at the right time.

Before him, several stronger armies had tried—and failed. Not because they were weaker, but because they lost the plot midway. Some lacked coordination. Others misread the moment. They were close, and then it all slipped.

Pakistan’s currency market is standing at its own gates of stability. After years of grinding crisis, we finally have all the right markers: high reserves, a current account surplus, record remittances, an IMF umbrella, and global markets giving nods of approval. And yet, the currency market feels dysfunctional. It’s not that the Rupee has depreciated 2% this year, as we were expecting the Rupee to hit 285/$ soon, its the bid-offer spread deteriorating with multiple rates being quoted and sparse availability of forex liquidity in the market, which is making the market feel dysfunctional.

This isn’t the result of external siege. This sounds like reaching the gates… and turning back. Already, we are seeing initial signs of panic and speculative moves.

Competing against Hawala
In defence of this parallel market rates, some analysts say that a higher rate for remittances is required to compete against the informal hawala regime. They say that since the incentives are rationalised, remitters will be more keen to send their money through hawala if they get better rates there.

How do we see Rupee in the future
It appears that this practice of bigger spreads is going to stay for the near future. It also appears that forex liquidity will remain tight as SBP continues its purchases from the market. Our expectations are that post US-PAK trade talks, Pakistan’s exports will get a boost. However, remittances may come under pressure.

Overall, we see Rupee stable and will likely continue its gradual weakening of 10-20 paisa every week

Dollar Drama & Data Dependency
The greenback’s back, after wobbling through the Powell-firing rumors (spoiler: didn’t happen), the US dollar found its footing, syncing neatly with Treasury yields and reminding traders who’s boss. With markets now laser-focused on incoming data—retail sales, jobs, CPI—the buck’s next move hinges more on Excel sheets than political theater. Meanwhile, US equities are partying on record highs, and everyone’s waiting to see if the ECB or another surprise earnings beat will crash the vibe.

Tariffs, Tantrums & BRICS Bruises
Trump’s back with his tariff bat, slapping 50% on Brazil and 10% on all things BRICS—not for trade imbalance, but because he didn’t like Rio’s group chat on BRICS. The move is seen as retaliation for:
– BRICS condemnation of U.S. bombing in Iran
– The BRICS alternative dollar payment system
– Political alignment with Brazilian opposition against President Lula Da Silva

Cue global bond markets flaring up: US 10Y yields shot to 4.42%, 30Y touched 5%. Inflation risks are still a mystery, but the yield curves have already voted: markets expect long-term inflation risk.

Projections
USD/PKR
• 1 Week: 285.00
• 1 Month: 286.00
• 1 Quarter: 287.50
EUR/USD
• 1 Week: 1.1652 (Bearish)
• 1 Month: 1.1708 (Bullish)
• 1 Quarter: 1.1825 (Bullish)
GBP/USD
• 1 Week: 1.3440 (Bearish)
• 1 Month: 1.3628 (Bullish)
• 1 Quarter: 1.3825 (Bullish)
USD/JPY
• 1 Week: 147.48 (Bearish)
• 1 Month: 148.18 (Bearish)
• 1 Quarter: 142.25 (Bearish)
Oil WTI
• 1 Week: 67.38 (Sideways)
• 1 Month: 68.88 (Bullish)
• 1 Quarter: 72 (Bullish)
Gold
• 1 Week: 3345 (Sideways)
• 1 Month: 3260 (Neutral)
• 1 Quarter: 3246.67 (Neutral)