- July 12, 2025
- Posted by: Tresmark
- Categories:
Early signs point to the Rupee extending its losing streak. Last week, it shed 25 paisa, where as MTD it has lost 75 paisa. Importers continue to be caught in a dilemma—bidding aggressively for a scarce currency giving 1-2 Rupees higher than inflows.
Lets review this in context of global factors
– Dollar index has lost 12% YTD with analysts expecting it to dip by another 5-10%. This does not bode well for the Rupee that is loosing to the dollar which in turn is loosing to other currencies
– EM currencies are mostly gaining against the dollar (especially BRL & ZAR) where as INR is steady and Takka has depreciated in line with PKR. This means that the delta between PKR and EM currencies is also increasing
– Yields in local bond markets dropped in anticipation of an impeding 50-100 bps rate cut, especially as inflation remains subdued and reserves have touched 4 year highs
The US Factor
The Fed is still grappling with the fallout of tariff tantrums, and now faces fresh uncertainty from escalating immigration crackdowns. The weakening Dollar Index and growing recession fears are pushing global portfolio managers toward emerging markets.
This shift could benefit Pakistan—last fiscal year saw outflows of over $1.5bn, mainly as bond yields dipped. But with global bond markets losing their appeal, attention may pivot toward equities, especially the PSX.
The KSE-100 delivered a staggering 86% return in USD terms last year, and another 11% in H1 this year. If global risk capital begins to rotate into frontier equities, PSX could see a significant boost.
CDS spreads have improved, credit ratings are better, and the current account is projected to remain in surplus. But if anything could spook incoming investors, it’s erratic currency management. That remains the single largest reputational risk to capital inflows.
Why the Currency Market Feels Dysfunctional
In recent months, the emergence of differential exchange rates for exporters and remittances has created visible distortions. Importers, too, are struggling—unable to access competitive quotes, and forced to contend with unusually wide bid-offer spreads.
This fragmentation has unsettled market participants. The distortion in remittance incentives—artificially skewed for months—prompted the central bank to finally acknowledge the need for rationalisation. Yet, despite this, dual rates and wide spreads persist, keeping uncertainty firmly in place.
Analysts are optimistic that, with Pakistan having met its reserves target, FX markets could normalise. That would rebuild confidence among foreign portfolio investors and nudge exporters to repatriate proceeds more freely.
With forward premiums firming, there’s also hope exporters will resume forward-selling, helping ease liquidity constraints.
But until clarity returns, volatility will continue to cloud the Rupee’s outlook—despite seemingly supportive fundamentals.
To find out more about markets in the current year, register for an expert Webinar by FMA and Tresmark here https://tresmark.com/webinar/
Projections
USD/PKR
• 1 Week: 284.60
• 1 Month: 285.25
• 1 Quarter: 286.50
EUR/USD
• 1 Week: 1.1698 (Sideways)
• 1 Month: 1.1598 (Bearish)
• 1 Quarter: 1.1756 (Sideways)
GBP/USD
• 1 Week: 1.3495 (Sideways)
• 1 Month: 1.3586 (Bullish)
• 1 Quarter: 1.3790 (Bullish)
USD/JPY
• 1 Week: 145.93 (Bearish)
• 1 Month: 144.25 (Bearish)
• 1 Quarter: 142.38 (Bearish)
Oil WTI
• 1 Week: 65.75 (Bearish)
• 1 Month: 67.43 (Sideways)
• 1 Quarter: 66.12 (Sideways)
Gold
• 1 Week: 3360.33 (Sideways)
• 1 Month: 3365.83 (Neutral)
• 1 Quarter: 3394.29 (Bullish)
