ISLAMABAD: On the second working day following the Eid holidays, the value of the US dollar continued its ascent against the Pakistani Rupee.
The dollar increased to Rs278.25 on Tuesday with a gain of 13 paisas in the inter-bank while in the open-market trading, the value of dollar surged above 279.
Looking ahead to European and global markets, there’s a somber tone as tensions escalate in the Middle East and concerns about prolonged higher US interest rates dampen investor sentiment.
This has led to a decline in Asian stocks, a rise in the dollar to its highest level in five months, and the yen struggling at levels not seen since the mid-1990s.
Expectations for European markets are similarly downbeat, with futures indicating sharp declines at the opening bell. Investors will closely analyze UK labor and wage data to gauge the timing of potential rate cuts by the Bank of England, with August being priced in as the most likely start date for policy easing, anticipating around 49 basis points of cuts for the year.
Contrastingly, the Federal Reserve appears less inclined to rush into rate cuts, particularly after March’s retail sales surpassed expectations, indicating a resilient US economy.
Market expectations for rate cuts have diminished, now projecting less than two cuts this year, compared to the six anticipated at the start of 2024. The easing cycle is now anticipated to commence in September, pushed back from June, which was previously delayed from March.
Comments from Fed officials, including San Francisco Federal Reserve Bank President Mary Daly, have reinforced the notion that there’s no immediate need for rate cuts. Daly emphasized the importance of not acting urgently when such urgency is deemed unnecessary.
Meanwhile, the ongoing global uncertainty has spurred a flight to safe-haven assets like gold and the US dollar, as the world awaits Israel’s response to Iran’s first-ever direct attack.
The yen, traditionally sought as a safe-haven, has weakened further to 34-year lows against the backdrop of widening interest rate differentials between the US and Japan, following a sell-off on Friday.
Despite China’s GDP surpassing estimates, concerns linger among investors due to weaknesses observed in March data, casting doubts on the pace of the country’s economic recovery.
I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.
