In 2022, Pakistan implemented stringent import restrictions aimed at curtailing capital outflows from its foreign reserves. However, the removal of these restrictions was made contingent upon securing a $3 billion IMF loan.
†Concurrently, the US dollar has experienced a substantial decline in value relative to the Pakistani Rupee (PKR), with the latest exchange rate standing at 1 USD, equating to 296.92 PKR.
This rapid depreciation of the US dollar represents a noteworthy development in the currency exchange landscape. The Pakistani Rupee has exhibited strength against the US dollar, appreciating for the seventh consecutive trading session, ultimately settling at 297.96 in the inter-bank market on Thursday, as the Rupee continued to consolidate gains against the dollar.
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Prior, the USD/PKR currency pair had exhibited a persistent upward trajectory for the US dollar and a concurrent devaluation trend for the Pakistani Rupee, with the latter falling to a record low in forex trading. This dynamic can be attributed primarily to the recent relaxation of import restrictions, resulting in heightened demand for the US dollar within the foreign exchange market.
USD/PKR technical analysis
The USD has been crushing the PKR since 2018. However, the difference began to increase further in late 2021, making the PKR collapse and trade at a historically lowest rate at 299 Rupees for 1 USD.
Typically, when we see such an immediate rise where each step higher is steeper than the last, it typically means that a shift in sentiment is likely to follow.
On the USD/PKR chart, we have an evening star pattern at the recent top, which is a bearish reversal pattern. This means the price is likely to stall from here.
Given there are deep fundamental issues with the Pakistani economy, we need further confirmation in the coming months that the trend has finally shifted.
On the positive side of the rupee, though, Pakistan is taking action to eliminate illegal dollar trades in an effort to fight inflation during a period of low foreign reserves. This has also helped lift the Rupee in the past week.
The Forex Association of Pakistan (FAP) President Malik Bostan claimed that the US dollar could fall to as low as PKR 250 if the crackdown against illegal trades continues. This could be the positive fundamental change for the Rupee that is needed to break the freefall.
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