Daily Times

The Pakistani rupee registered improvement against the US dollar, appreciating 0.1% in the inter-bank market on Friday.

At close, the currency settled at 278.16, a gain of Re0.28 against the US dollar.

On Thursday, the rupee had settled at 278.44, according to the State Bank of Pakistan (SBP).

In a key development, the International Monetary Fund (IMF) Executive Board is scheduled to take Pakistan’s 37-month Extended Fund Facility (EFF) of about $7 billion on agenda on September 25.

This was confirmed by Julie Kozack, Director of the Communications Department at IMF, while addressing a press briefing. “We are very happy that we can say now that the board meeting is scheduled for September 25”, she said, adding that Pakistan had obtained the required financing assurances from development partners.

Moreover, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) unleashed on Thursday its most aggressive cut in the key policy rate since April 2020, reducing it by 200 basis points (bps) to bring it down to 17.5% amid slowing inflation and declining international oil prices.

Internationally, the US dollar softened on Friday, with the euro and the yen on the rise as investors remained on tenterhooks ahead of next week’s central bank bonanza where the focus is on the Federal Reserve and the size of its expected interest rate cut.

While the Fed is all but certain to cut rates next week, uncertainty around whether it will go with a 25 basis point cut or 50 basis points has kept investors on the edge and weighed on the US dollar.

Analysts pointed to media reports from the Financial Times and the Wall Street Journal suggesting the Fed’s decision would be a close call as one of the reasons for traders adding to wagers of a big rate cut next week.

Higher US jobless claims data released on Thursday and the Wall Street Journal article on the Fed’s rate cut dilemma revived bets on a jumbo cut at the September meeting, according to Christopher Wong, currency strategist at OCBC.

Traders are pricing in a 43% chance of the Fed cutting rates by 50 bps, up from 27% a day earlier, with a 57% probability of a 25 bps cut, CME FedWatch tool showed. Markets are pricing in 113 bps of easing from three remaining meetings this year.

Oil prices, a key indicator of currency parity, extended their rally on Friday and were on course for a weekly gain, sparked by output disruption in the US Gulf of Mexico after Hurricane Francine forced the evacuation of production platforms.

Brent crude futures rose 38 cents, or 0.53%, to $72.35 a barrel by 0735 GMT.

US West Texas Intermediate crude futures rose 40 cents, or 0.58%, to $69.37.