USD/PKR: Pakistani rupee sits at record low as IMF talks intensify
- The USD/PKR exchange rate has been in a strong bullish trend in the past few months.
- Talks between the IMF and Pakistan are going on and making progress.
- Pakistan was hit by a 6.5 magnitude earthquake this week
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The Pakistani rupee sat at its lowest level on record as the country moved into another disaster. The USD/PKR exchange rate rose to a high of 285.23, which was much higher than the year-to-date low of 225. It has jumped by over 600% since 1998, making the rupee one of the worst-performing currencies.
Pakistan, a country of over 23 million people, has become a highly embattled place in the past few years. The economy has slumped and natural disasters have become the norm. Last year, the country experienced some of the worst floods in modern times. The floods caused damage worth over $15 billion ans killed almost 2000 people.
And this week, the country went through a 6.6 magnitude earthquake that injured over 200 people in the country. The number of deaths is expected to continue rising while the economic damage will be substantial.
At the same time, Pakistan’s government is battling another economic earthquake as some of its debt come due in June. The government is now negotiating with the International Monetary Fund (IMF), which is planning a bailout for the country.
In a statement this week, the IMF said that it had seen substantial progress during the negotiations with the Pakistani government. As such, this means that the government will likely receive the $6.5 billion loan from the IMF to prevent a default in May. It needs to pay about $3 billion by June while the remaining $4 billion will need to be rolled over.
Pakistan has made some actions in a bid to receive these funds. For example, it has significantly devalued its currency and increased some taxes, including energy ones.
Still, the Pakistani economy remains in trouble as inflation remains at an elevated level. And like other emerging markets, the country is going through a severe dollar shortage as the Fed reduces its balance sheet through the quantitative tightening process.
USD/PKR price prediction
I recently wrote about the Pakistani rupee and warned that it will continue weakening in the coming months. A deal with the IMF will likely provide some short-term relief for the currency.
On the daily chart, we see that the USD/PKR price has been in a strong bullish trend in the past months and is now trading at its highest level on record. The bullish trend is being supported by the moving averages while the Average Directional Index has moved above 60.
Therefore, the USD to PKR exchange rate will likely continue rising as buyers target the next psychological level at 300.
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