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Budget Week Speculation: Can the Rupee Surge to 260 Against the US Dollar?

The upcoming week holds significant events for Pakistan, particularly concerning the Pakistani Rupee (PKR) and gold markets. The State Bank of Pakistan (SBP) is set to announce a crucial interest rate update before the federal budget 2024-25 presentation.

There’s speculation that the rupee could rise to 260-270 against the US dollar due to decreased dollar demand following the departure of many Pakistani pilgrims to Saudi Arabia for Hajj. However, this level of growth depends on factors like an IMF loan program agreement, SBP policy rate cuts, and a people-friendly budget. Despite this, some analysts expect the PKR to remain stable at its current level of 278/$.

Strong inflation data hint at a potential rate cut, with expectations of a cut exceeding 100 bps. The SBP Governor’s news conference following the interest rate announcement will be closely watched for further insights.

In the gold market, prices are expected to remain volatile, with an upside capped around Rs. 250,000 and support around Rs. 242,000-244,000. The PKR’s position against gold could improve if big buyers like China stay out of the market.

Regarding other currencies:

  • Euro (EUR): Expected to move as high as 305 and needs to fall below 300 to improve ex-pat remittances from the EU.

  • British Pound (GBP): Strong resistance is seen at Rs. 356, but uncertainty in the UK market could lead to significant gains for the PKR against GBP.

  • Australian Dollar (AUD): Expected to remain under pressure, with a potential decrease to 182-183 if 185 breaks.

Overall, the PKR/$ exchange rate is anticipated to start the week strongly, but economic activity during the budget week remains unpredictable.

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