*Rupee outlook amidst challenges* Tresmark: With reserves on a decline, Current account again on deficit, and REER stretching it self in over valued territory, the buzz amongst people is that the Rupee is poised to depreciate. To challenge this perception, we have structured a percentile chart from Oct 23 onwards at which time, Rupee was the strongest post covid. The chart highlights the following insights: 1. Reserves have declined from its high point of $16.4bn (Dec 24) to $15.9bn (Feb 25) ~ that’s a mere 2.8% fall from its high point. Reserves have declined on consistent outflows from SCRA/portfolio investments (mostly TBills), repatriation of profits (that were stuck up since last 2 years), and marginally higher imports (mainly cotton & oil). It would seem that some disbursement out of a total of $1bn from middle eastern banks (as mentioned by the Finance Minister) and the next IMF tranche will bolster reserves 2. REER appreciating by 0.4% from 103.7 to 104.1 is not earth shattering. REER was also in the 104 region around same period last year (Feb to Apr 2024). With recent inflation in Pakistan clocking around the 2.4%, it is unlikely that REER will be the culprit any time soon *Dollar Liquidity* During the last 2 weeks, most banks were short on dollar liquidity. Imports, even small ones, are being delayed. Typically this would have resulted in buy sell swaps suppressing forward premiums, but there is buying at dips keeping 1 month and more forward premiums intact. It is interesting to note that SBP’s short swap book for the fist time in years have dipped below $3billion (Dec 24), implying consistent buying at dips. *Rupee Outlook* Analysts are expecting Rupee to trade just under 280/$ in the coming week, with anticipation that Ramadan flows will start to support Rupee from next month onwards. While there are factors that can put pressure on the Rupee, like regional currencies depreciating (Indian Rupee, T Lira, B Taka) and also uncertainty around new Tariff structures, its more likely that Rupee will under go a very measured depreciation of 5-10 paisa per week. *Global Insights* * Gold prices continue to move swiftly higher as gold nears $3000/ounce. It may seem that that we have already seen a big rally, but its more likely that gold will press ahead * Germany goes to the polls, but far-right AfD is unlikely to form a government. * US inflation remains sticky around the 3% mark * Trump’s Shift Away from Europe: Trump is moving away from traditional NATO alliances, favoring a transactional “pay-to-play” model for collective security. This raises geopolitical risks for Europe and increases uncertainty in financial markets. It appears that the US is on its way to dump Ukraine. * Turkey & Middle East Dynamics: Erdogan’s talks with PKK could lead to geopolitical shifts across Syria, Lebanon, and Iraq, impacting markets. https://live.tresmark.com/Home/NewsPopupFullView?pk_NewsID=2231089