KARACHI (Web Desk) – As the US dollar is set to achieve the biggest monthly gain since September against top peers globally, the Pakistan rupee was stable while the stocks returned to the green zone after the benchmark KSE-100 Index at one point gained over 1 per cent on Wednesday.
By the time the trading was closed for the day, the KSE-100 Index settled at 61,979.18 after a gain of 137.44 points, or 0.22pc.
The session saw the KSE-100 touching 62,600.12 around 1:20pm PST as the market saw easing of foreign selling while the energy sector too boosted the shares amid the hopes that the government would solve the circular debt issue.
But the market couldn’t sustain the trend amid lack of any solid news or boosting factor as the political uncertainty leading to the February 8 elections and the conviction of PTI founder in another case.
However, the market managed to halt the slide experienced during the first two sessions of the week where the KSE-100 Index shed over 3pc of its value before and after the expected decision by the central bank’s Monetary Policy Committee to maintain the interest rates.
One can say that the investors are seemingly adjusting to the reality that there won’t be any rate cuts for at least two more months while any future desired move towards slashing the borrowing costs depends on the ability to reverse the trend of rising inflation rate.
FEBRUARY 8
As the key policy rate will remain at 22pc for at least the next two months amid a rising inflation, one would have to see how the stock and currency market will behave during the days leading to Feb 8 elections, which are now less than 10 days away amid the related political uncertainty.
However, a thumping mandate with at least a simple majority will certainly help the boosting the market sentiments both in the case of rupee and stocks, as it is going to ensure a solid and long-term economic policies – a scenario not possible for coalition governments comprising parties with competing interests.
When it comes to the slashing the key policy [interest] rate, only three-times prime minister Nawaz Sharif’s PML-N has made a clear promise in its manifesto. Unfortunately, other parties are more or less silent on the issue.
DOLLAR PUZZLE
The US dollar headed for its biggest monthly gain since September and the yen for its sharpest drop in over a year on Wednesday, as traders waited on a US rates decision to round out January.
A sharp slowdown in Australian inflation pushed the Aussie dollar down 0.5pc to $0.6567 and rallied bonds as investors pulled forward wagers on interest rate cuts.
Elsewhere moves were more modest, and the yen made little immediate reaction to a hawkish tilt at the Bank of Japan, while markets waited to hear from the Federal Reserve.
The dollar was slightly down at $1.083 per euro and up 0.13pc at 147.8 yen early by 3:45pm PST.
It has gained 2.2pc against a basket of major currencies this month as markets dialled back expectations on the speed and scale of rate cuts in the face of strong U.S. economic data and pushback from central bankers.
The yen is down more than 4.5pc on the dollar this month and headed for its largest monthly drop since June 2022 as tepid wage data and cooling inflation leave room for the Bank of Japan to take its time raising rates. However, a summary of its January meeting on Wednesday showed its resolve strengthening and conditions supporting an end to negative rates relatively soon.
The dollar index was last up 0.18pc to 103.58. Sterling dipped 0.197pc to $1.267.
The Federal Reserve is expected to hold US interest rates steady but flag cuts are coming by dropping language indicating it is weighing further hikes.
Interest rate futures price a roughly 43pc chance of a Fed rate cut in March, down from 73pc at the start of the year.
Ahead of the Fed, French and German inflation figures are expected. Slowdowns there would foreshadow the same in Eurozone numbers due on Thursday and reinforce market expectations that European policymakers could start rate cuts as soon as April.
Expectations of interest rate cuts in China have driven a strong rally in the bond market this month while the yuan has been squeezed by flight from China's crumbling equity markets.
The Chinese currency held at 7.1817 on Wednesday, down 1pc for the month. China's manufacturing activity in January contracted for a fourth straight month, an official survey showed, suggesting the sprawling sector was struggling for momentum.