The Australian Dollar’s performance in 2023 has been influenced by many factors, ranging from commodity prices to domestic interest rates.
Despite a weak start to the year, recent strong GDP numbers from China—Australia’s largest trade partner—and increased trade volumes with the country have improved prospects for the Australian Dollar.
The performance of the Australian Dollar (AUD) against the Pakistani Rupee (PKR), in particular, has been impacted by Pakistan’s ongoing balance of payments crisis and the suspension of International Monetary Fund (IMF) loan disbursements.
The AUD to PKR exchange rate has experienced significant fluctuations since October last year. Analysts forecast potential recovery for the Pakistani Rupee if IMF loan disbursements can be secured.
The Australian Dollar’s Performance in 2023
The Australian Dollar has not experienced a strong start to 2023, with Q1 showing the AUD declining against many of the other major currencies. Several factors influence the Australian Dollar’s performance, including commodity prices, domestic economic indicators, and global economic events.
Market analyst at Conotoxia Fintech, Bartosz Sawicki, said: “The Australian Dollar has recently been one of the worst performers among the major currencies. The AUD depreciated almost 2% against the US dollar in Q1 of 2023.”
As Australia is a major exporter of natural resources, the demand and prices for these commodities directly impact the AUD. Being Australia’s largest two-way trading partner, China’s demand for Australian goods and services drastically impacts the performance of the AUD and the Australian economy.
Despite the weak start to the year, Sawicki noted: “As the Australian Dollar is strongly related to the performance of the Chinese economy, recent strong GDP numbers seem to bode well for this currency. The total trade volumes with China have picked up strongly, and the RBA may be less reluctant to resume interest rate hikes after a pause in March.”
Furthermore, domestic economic indicators such as GDP growth, inflation, and interest rates also play a vital role in determining the value of the Australian Dollar. The Reserve Bank of Australia (RBA) recently paused interest rate increases for the first time in 10 meetings, which may negatively impact the AUD if other economies continue to hike.
Is the Pakistani Rupee Strong this Year?
The Pakistani Rupee has faced considerable challenges recently, falling almost 20% against the Australian Dollar just this year. This depreciation is a consequence of the country’s ongoing economic struggles, particularly its balance of payments crisis.
Sawicki explains: “Pakistan is facing a severe balance of payments crisis. Due to an extremely low level of foreign exchange reserves, the authorities are desperate to secure external financing, namely lending from the International Monetary Fund.”
In 2019, Pakistan secured a $US6 billion IMF bailout, with an additional $US1 billion added in 2022 to aid in flood recovery. However, the IMF halted payments in November due to Pakistan’s failure to meet the conditions of the deal and make further progress with fiscal consolidation.
As a result, the performance of the Pakistani Rupee in 2023 is heavily tied to the likelihood of resolving these issues and unblocking IMF lending, says Sawicki.
The Central Bank’s monetary policy, foreign exchange reserves, and foreign direct investment (FDI) will all play a lesser role in determining the Rupee’s strength. Political stability and the country’s overall economic growth will also contribute to the currency’s performance against the Australian Dollar and other currencies.
AUD to PKR Exchange Rate
The AUD to PKR exchange rate has experienced significant volatility over the past six months, with several factors contributing to these changes.
“Given the differences in volatility levels, the AUD to PKR exchange rate is predominantly dependent on the performance of the Pakistani rupee,” Sawicki says.
Since mid-October 2022, the AUD to PKR exchange rate has surged by over 40%. Sawicki attributes this rapid increase to several factors.
“The AUD began to reverse its losses as market sentiment improved, the USD rally lost steam, and the PKR collapsed as the IMF suspended disbursements of the loan granted in 2019,” he notes.
These factors highlight the complex interplay between the Australian Dollar and the Pakistani Rupee, as well as their respective economies and the broader global market. The AUD’s recovery is partly due to improved market sentiment and the weakening of the USD’s rally. At the same time, the PKR’s decline is linked to the suspension of IMF loan disbursements.
Investors should closely monitor economic indicators, global events, and the ongoing IMF negotiations for Pakistan to better understand the AUD to PKR exchange rate’s trajectory. By keeping an eye on these developments, they can make more informed decisions about their investments in this currency pair.
Australian Dollar to Pakistani Rupee: Six-Month Forecast
The six-month forecast for the AUD to PKR exchange rate largely depends on the resolution of Pakistan’s IMF loan disbursement issue and the performance of the Australian Dollar against the US Dollar.
“Securing disbursements of the IMF loan, which were halted last year, seems to be the only chance for PKR’s recovery,” Sawicki says.
“Without securing the external funding, the further collapse of the Pakistani Rupee might be inevitable.”
On the other hand, the AUD is expected to gradually gain strength against the US Dollar in the coming months. Sawicki forecasts that “the AUD should gradually gain against the U.S. dollar, and AUD/USD is forecasted to extend the climb towards the 0.70 mark.”
Without securing the external funding, the further collapse of the Pakistani Rupee might be inevitable
Taking these factors into account, the six-month forecast for the AUD to PKR exchange rate will largely be influenced by Pakistan’s ability to secure IMF loan disbursements and the AUD’s strength against larger currencies like the USD.
Investors should closely monitor developments related to Pakistan’s IMF negotiations and the AUD exchange rate against major pairs to make informed decisions about the AUD to PKR currency pair. Investors can better position themselves to capitalise on potential opportunities in this volatile market by keeping an eye on these factors.
AUD to PKR Long-Term Forecast
In the long term, the performance of the Australian Dollar against the Pakistani Rupee will be shaped by various factors, including global commodity demand and the economic situation in both countries. Sawicki highlights the significance of these factors: “Improving Chinese economic performance and firming the global demand for commodities should prove to be supportive for the AUD in the longer term.”
As a result, the Australian Dollar is forecasted to outperform the US Dollar, which could further impact the AUD to PKR exchange rate. However, the future of the Pakistani Rupee remains uncertain, with Sawicki noting that “the Pakistani rupee might remain extremely vulnerable and volatile due to the lingering political turmoil and economic crisis.”
The resolution of Pakistan’s ongoing economic crisis is crucial for the Rupee’s stability. Sawicki emphasises that “without securing external funding, a default may be hard to avert”. This implies that the long-term forecast for the AUD to PKR exchange rate will be heavily influenced by Pakistan’s ability to secure external funding and address its economic challenges.
Investors should remain vigilant and closely monitor the global demand for commodities, the economic performance of China, and Pakistan’s progress in resolving its financial crisis.
