USD/PKR forecast for June: Pivotal month for Pakistani rupee

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Written on Jun 2, 2023

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The Pakistani rupee is hovering near its record low.
Pakistan’s inflation has surged to more than 200%.
The country is still negotiating with the IMF as the deadline nears.

The Pakistani rupee is loitering near its all-time low as investors brace for a pivotal month. The USD/PKR exchange rate was trading at 284.91 on Friday, a few points below its all-time high of 296.58. Similarly, the GBP/PKR price was trading at 360, which is slightly below the record high of 373.35.

Pakistan and IMF talks

Pakistan is one of the countries going through a major economic meltdown as the dollars dry and debts jump. Other countries on the verge are Lebanon, Argentina, and Zimbabwe.

Pakistan will be in the spotlight this month as talks with the IMF continues. The country has just a few days to go to satisfy the IMF, putting it at a risk of default. For one, it now needs to arrange new foreign koans and approve a new budget in line with its guidelines.

Most importantly, the IMF has insisted that Pakistan will need to let the open market determine the value of the rupee. If Pakistan fails to agree on this deal, the IMF will not revive its $6.5 billion commitment that was reached in 2017.

Failure to reach an agreement with the IMF will see Pakistan be the first major economy to default this year. Defaulting will push the country to uncharted territory and lead to the continued crash of the Pakistani rupee.

Such a move will crash an economy that is already vulnerable. The most recent data shows that the headline consumer price index (CPI) jumped to 224.4 in April. It was at 183% in the same period a year earlier. Analysts believe that the country’s inflation is much higher.

At the same time, the government is also focused on politics. As I wrote in my last article, the police arrested Imran Khan, the former president, leading to protests.

USD/PKR forecast

USD/PKR chart by TradingView

Therefore, the Pakistani government will have no choice but reach an agreement with the IMF because of the dire impact a default. In the near term, a deal will be positive for the Pakistani rupee.

Turning to the daily chart, we see that the USD/PKR pair has been in a tight range in the past few weeks as investors wait for the IMF deal. This price is a few points below its all-time high and is above the 50-day and 100-day moving averages.

Therefore, if there is a deal, the pair will likely retreat and retest the support at 276. It will then resume the bullish trend as investors embrace the new normal.