The USD to PKR exchange rate has shown recent volatility primarily influenced by both domestic and international factors impacting each currency. The US dollar has seen a notable decline following the release of softer inflation data, with analysts suggesting that expectations of aggressive Federal Reserve rate cuts in 2026 are contributing to this downtrend. The Federal Reserve's shift in tone has resulted in reduced interest rate differentials, which tends to undermine the dollar's strength.
As of late December 2025, the USD was trading at approximately 280.3 PKR, remaining in a narrow range just below its three-month average of 281.6 PKR. This stability suggests that while the dollar has weakened due to decreasing demand as risk sentiment improves globally, the Pakistani Rupee is also facing significant challenges. Analysts have noted a 12% depreciation of the PKR against the USD since the beginning of 2025, primarily attributed to geopolitical tensions impacting trade and currency stability.
The State Bank of Pakistan has intervened in foreign exchange markets, purchasing sizable amounts of USD to bolster the national reserves. This activity has created artificial demand for the PKR but highlights the substantial pressures the currency is under. Market experts anticipate that instability could lead the rupee to further declines, with projections indicating a potential reach of 100 PKR/USD by year-end if current conditions persist.
Inflation in Pakistan remains elevated, and trade deficits add to the currency's woes. However, remittance inflows and recent IMF-backed reforms aimed at fiscal consolidation provide some stability. The overall economic context for Pakistan suggests that while there may be moments of strength due to central bank interventions and geopolitical shifts, the rupee is likely to remain under pressure.
In summary, the outlook for the USD to PKR exchange rate reflects conflicting influences—whereby a weakening USD could support the PKR against some pressures, the ongoing geopolitical and economic instability in Pakistan presents a significant risk to the rupee's value in the near term. Investors and businesses should remain vigilant as key economic indicators and global developments unfold.
