Pakistan's rupee has fallen to a fresh six-month low as the West pushes for global action against Isis militants
Pakistan is reportedly seen as a major centre for coordination of Islamist militant activities and the current campaign could have an impact on the country.
Apart from terrorism, devastating floods have caused economic hardship across the country.
The USD/PKR rallied to 102.820, its highest since 10 March, 0.6% down from the previous close.
The Pakistani rupee's 3.9% fall since early August matches the 3.8% drop in the dollar index, over the same period.
On 1 September, government data showed that Pakistan's inflation rate fell to 7% in August from 7.88% in the previous month.
The Karachi Stock Exchange's KSE-100 has fallen from a month's high of 30,044.89 to as low as 29,891.64 before recouping some of the gains.
Since late August, the pair has been trying to break above the 50% Fibonacci retracement of the selloff from last November's high to the April low.
The attempt received a big boost on Monday as the pair managed to rise to a new multi-month high.
A break above that will open 102.38, the 61.8% Fibonacci ahead of 104.60, 106.32 and 107.32 before a retest of the November high of 108.60.
On the downside, the pair has its first target at 100.78, the 38.2% retracement and then at the psychologically important 100-mark.
The USD/PKR will then aim 98.55 and 97.125 ahead of a retest of the April low of 95.76.