Rupee registers gain against US dollar

The Pakistani rupee exhibited a slight improvement against the US dollar, rising 0.01% in the inter-bank market on Wednesday. At the close of the day, the local currency stood at 276.62, marking an increase of Re0.03 compared to the greenback. On Tuesday, the rupee had settled at 276.65 against the dollar. Internationally, the US dollar demonstrated gains nearing a two-week peak in early Asian trade on Wednesday.

This surge was attributed to a hotter-than-anticipated inflation report and cautious remarks from Federal Reserve officials, which heightened expectations that the central bank would hike interest rates in the coming month. The US dollar index, which gauges the strength of the dollar against a basket of six currencies, remained stable at 102.22, nearing its highest level since October 28.

The index had risen by 0.5% on Tuesday following data revealing that US consumer prices surged more than anticipated in October, driven by increased costs for food and housing. The dollar maintained its upward trajectory in early Asian trading, with the euro and British pound remaining flat at $1.1168 and $1.3345, respectively. Conversely, the US dollar was unchanged at 158.715 yen against the Japanese yen, while the Australian and New Zealand dollars saw marginal gains.

Rising inflation concerns, as expressed by voting members of the Federal Reserve's rate-setting committee, bolstered expectations for additional rate hikes, prompting traders to abandon the notion of a rate pause at the upcoming policy meeting, which concludes on December 9. Fed funds futures now suggest a 91.9% probability of a 25-basis-point rate increase next month, up from 84% the previous day, according to CME Group's FedWatch tool.

Market participants have largely discounted the likelihood of a rate pause and assign a 9.1% chance of a 50-basis-point hike, along with better-than-even odds of a second hike in January. Oil prices, a significant factor in currency valuation, experienced an uptick on Wednesday, recovering from the previous session's two-month lows.

This market volatility oscillated between hopes for a de-escalation in the US-Israeli conflict with Iran and apprehensions regarding attacks on shipping vessels in the Strait of Hormuz. Also on Wednesday, a regional governor reported that a drone attack resulted in a fire at the port area of Ust-Luga, located on the Baltic Sea in northwest Russia, causing injuries to three workers.

Brent futures increased by $1.04, or 1.1%, to $92.53 per barrel at 0420 GMT. West Texas Intermediate crude rose by 67 cents, or 0.8%, to $86.71.