Pakistani rupee edges higher in interbank trade as U.S. dollar firms globally

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Pakistani rupee edges higher

Highlights

Pakistani rupee appreciates 0.01% in interbank trade to close at 277.02 against the U.S. dollar, gaining Re0.03 from Tuesday's close.
The U.S. dollar index rises 0.3% to 102.13 as oil prices support the greenback and investors await Federal Reserve September minutes for rate guidance.
Market expectations for a Fed October rate hike fall to 21.6% from 51% last week, while December odds remain high at 68.6% according to CME FedWatch.

Interbank close and global currency backdrop

As reported by Pakistan Business Recorder, the Pakistani rupee extends its slight advance against the U.S. dollar on Wednesday, appreciating 0.01% in the interbank market to close at 277.02. The local unit gains Re0.03 against the greenback after settling at 277.05 on Tuesday.

In international markets, the U.S. dollar edges higher as rising oil prices support the currency and investors await the minutes of the Federal Reserve's September policy meeting. Market participants are also watching remarks from policymakers for clues on whether another rate increase remains likely in the near term.

The euro gives back part of its earlier gains after support from French bonds in the previous session, while the Japanese yen weakens even after a dovish Bank of Japan board member says she would support interest rate increases. Sterling also loses ground against the U.S. currency.

Fed expectations shape broader market impact

Later on Wednesday, the U.S. central bank is due to release minutes from its September meeting, when it raises interest rates for the first time since 2023 in response to inflation. At the same time, recent comments from Fed officials come across as less hawkish after weaker-than-expected personal consumption expenditure and jobs data last week.

The dollar index rises 0.3% to 102.13, recovering from a 0.27% decline on Tuesday. The euro falls 0.4% to $1.1216, the yen weakens 0.13% to 158.31 per dollar, and sterling slips 0.21% to $1.3248.

Expectations for a Fed rate increase later this month retreat, with CME FedWatch showing a 21.6% chance of at least a 25 basis point move in October, down from about 51% a week earlier. Even so, markets still price in a 68.6% chance of a hike at the December meeting, keeping global currency markets sensitive to U.S. policy signals.

In our earlier article on emerging-market outflows triggered by Fed tightening, we explained how the Fed’s first rate hike since 2023 pushed U.S. Treasury yields and the dollar higher, prompting foreign investors to pull billions from emerging-market stocks and bonds in September. We noted that the shift in global monetary conditions tightened financial conditions for developing economies, weighing on risk appetite and putting additional pressure on EM currencies and local markets.

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