Rupee’s glow up amidst global turmoil

While strange things are happening in the global financial markets, something stranger unfolded in Pakistan, which recorded a billion dollar plus current account surplus. With this, analysts are expecting a $1.5bn surplus for the full fiscal, something we haven’t seen in over 2 decades.

Pakistan’s $1 Billion Surprise: Relief or Mirage?
Does this ease pressure on the Rupee? Absolutely. But it’s not just the current account surplus doing the heavy lifting.
– The Dollar Index has slipped below 100 and looks set to crash toward 92.
– REER has appreciated, and with inflation hitting record lows, price pressures should stay tame for the next 2–3 months.
– Add an IMF deal in the pipeline and a favourable credit rerating, and it looks set for the Rupee.

Yet—despite all this—FX reserves haven’t budged. Heavy outflows from T-Bills and profit repatriations are keeping things tight. Which is why—even with all the feel-good surplus vibes—a managed depreciation (~5 paisa a week) still makes sense. Every major economy is trying to quietly devalue in this escalating trade-and-tariff mess, and an over valued currency is the last thing you would want to have.

Global trade is showing symptoms of a serious illness
Chinese factories just laid off millions of workers, youth unemployment is estimated at 20–25%, and U.S./EU import demand is collapsing. The silence from Beijing is ominous—and many are positioning for a shock-and-awe Yuan devaluation. If that happens, expect a cascading currency war, starting with Asia and ricocheting through every emerging market. Either way, Xi is likely bracing for serious public unrest to hold the line on his economic empire.

Meanwhile, King Dollar has lost 10% since January, and the DXY could head further down. For now, this gives EM currencies like the Rupee some breathing room. But a falling dollar also means higher commodity prices—oil, metals, grains—and that brings imported inflation right back through the door.

Interest Rates: A nail biter
The upcoming monetary policy meeting is going to be a nail-biter. The market’s split—should we hold rates or cut?
– The ECB just slashed its rates, citing global slowdown and weak growth.
– Turkey hiked by 350bps, trying to claw back credibility after economic jitters.
– And over in the U.S., Trump is screaming at the Fed to cut rates before the May 7 FOMC. But markets have largely shrugged it off, pricing in just a 20% chance of cuts.

For Pakistan, an easing cycle would be the smart play—it cushions us from global shocks, trims credit spreads, and gives growth a fighting chance.

Global Markets: Cracks Turning Into Craters
Last week might have looked green on the surface, but there are serious rifts brewing underneath:
– T-Bill rates jumped from 3.6% to 4.4%, thanks to a blow-up in hedge fund basis trades.
– The 10Y U.S. yield is eyeing 5%.
– Credit spreads are deteriorating, margin calls are triggering a liquidity crunch, and faith in markets is wearing thin.
– The USD Index is down 10%, and equities have already lost $12 trillion—with further losses on the cards