Karachi, March 9, 2025 – The Pakistani rupee is likely to maintain its current trading pattern against the US dollar in the coming week.
Market participants are closely monitoring the upcoming monetary policy meeting of the State Bank of Pakistan (SBP) on Monday for insights into the rupee’s trajectory.
The rupee ended last week at 279.97 per dollar in the interbank market, slightly depreciating from its earlier level of 279.77 recorded on Tuesday. Monday’s bank holiday due to Zakat deductions limited trading activity at the beginning of the week.
Traders believe that the rupee’s movement will remain largely dictated by the supply and demand of dollars in the open market. Many expect the currency to stay within its current range, avoiding a significant drop below the 279 mark. A key factor influencing the rupee’s stability will be the SBP’s decision on interest rates, which will be announced at the start of the week.
According to financial analysts, real interest rates in Pakistan have already surpassed 10 per cent, strengthening calls for a rate cut. Inflation forecasts indicate an average of 3.75 per cent until June 2025 and 4.9 per cent until December 2025. However, core inflation remains elevated at around 8.0 per cent, requiring close monitoring by the central bank.
The decline in global energy prices is also impacting the rupee-dollar dynamics. Brent crude recently fell to $69.3 per barrel, its lowest in three years. While this should ease some inflationary pressures, it may not be sufficient to justify a major shift in monetary policy. Market analysts suggest that recent auctions and trade flows indicate that investors are bracing for the possibility that the SBP may opt to hold rates steady. The rupee’s strength remains a key consideration in these decisions.
Despite financial stability in recent months, Pakistan’s economic fundamentals remain a concern. The lack of structural reforms, minimal tax base expansion, and stalled privatization of loss-making state entities continue to weigh on investor confidence. Additionally, the ongoing International Monetary Fund (IMF) review has heightened caution among market stakeholders, making them more prudent in their investment decisions.
Foreign exchange reserves have been declining, and the latest current account figures reveal a deficit. This reality necessitates maintaining attractive interest rates to keep the rupee stable against the dollar. However, analysts caution that halting rate cuts could push yields higher by 25-40 basis points, potentially counteracting efforts to sustain economic growth.
A recent market survey by Tresmark suggests a divided sentiment regarding rate expectations. While 58 per cent of participants predict a 100-basis-point cut, others anticipate a continuation of the current policy stance. The central bank’s balancing act between economic growth and financial stability will be pivotal in determining the rupee’s movement against the dollar in the coming sessions.