The embattled Pakistani rupee sell-off continued on Wednesday after the arrest of Imran Khan, the former president. The USD/PKR pair jumped to 283.84 while the GBP/PKR and EUR/PKR rose to 358 and 312, respectively. Further, the INR/PKR was trading at 3.45.
Imran Khan arrest
The Pakistani rupee has been under pressure in the past few months, as I wrote in this article on Monday. The main reason for this situation is that Pakistan is going through one of its worst economic crisis on record as it stares towards a default.
As a result, the country has been negotiating with the International Monetary Fund (IMF) in the past few months. And with time running out, it is unclear whether the two sides will reach an agreement soon. The two sides issued diverging statements after their meeting last week.
Now, the situation in Pakistan has worsened following the arrest of Imran Khan, the former president who faces over 80 charges. Some of these charges relate to corruption and the gifts he received when he was in power.
As a result, protests have erupted in most parts of the country and there is a likelihood that the situation will get worse in the coming weeks. These protests will likely coincide with those relating to the state of the economy, where inflation has surged to more than 36%. Analysts believe that the country’s real inflation rate is much higher than the official figure.
In its most recent assessment, the IMF said that the economy will grow by 0.2% this year after it expanded by 6% in 2022. That assessment did not factor in the current protests, meaning that the economy could sink into a recession this year.
Further, the terms of the IMF deal will likely have an impact on the economy. For example, the government has been forced to raise some taxes and slash subsidies.
USD/PKR technical analysis
The USD/PKR exchange rate has been in a tight range in the past few weeks. It is sitting a few points below the all-time high of 287.99. The pair remain slightly above the 25-day and 50-day moving averages while the MACD indicator has drifted downwards.
Therefore, the pair will likely have a bullish breakout, with the next level to watch being at 300. The same trend will happen on the EUR/PKR, GBP/PKR, and INR/PKR since the Pakistani rupee is the most vulnerable part of the equation.
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