USD/PKR: Pakistani rupee is at risk as political tensions rise

The Pakistani rupee moved sideways on Monday morning as the country’s political crisis continued. The USD/PKR exchange rate was trading at 285.30 on Monday, a few points below its all-time high of 296.

Pakistan political crisis

Pakistan has been an embattled economy this year. The political crisis in the country escalated last week after a judge sentenced Imran Khan to a three-year jail sentence, leading to protests in several towns. Khan, the former president, has more cases that could lead to more time

At the same time, there are fears that Pakistan will delay its general election scheduled for this year. The country’s law minister said that the election will only take place when a new census is completed and new boundaries are drawn. Some analysts believe that the move is mostly because of the growing popularity of Imran Khan and his party.

All these issues will likely affect the country’s economic recovery. For one, it comes shortly after the International Monetary Fund (IMF) approved a long-delayed $3 billion bailout, as I wrote in this article. Pakistan needs billions of dollars in 2024 as some debt maturities near.

Pakistan’s economy will also be affected by the resurgent crude oil prices. After falling to a low of $66, Brent has jumped to over $87 and analysts believe it will average at $90 for the rest of the year. 

This is notable since Pakistan imports billions of dollars worth of refined and crude petroleum. Also, palm oil price has also jumped as drought concerns remain. Pakistan is a leading importer of palm oil. 

On the exports side, the country’s key products are facing headwinds as the global recovery slows. The biggest exports are house linens and non-knit products.

Therefore, the outlook for the Pakistani rupee is bearish considering that the Fed is expected to maintain a hawkish tone this year.

USD/PKR technical analysis

The USD/PKR price has been in a strong bullish trend in the past few months. It has jumped by more than 26% from the lowest level this year. The pair is still hovering above the 50-day moving average. The Average True Range (ATR) has moved sideways.

Therefore, the long-term outlook for the USD to PKR exchange rate is bullish as the impact of the recent bailout fades. If this happens, the pair will likely jump to 300.