Most common way to prop up or control the value of a currency by the country’s central bank is to go out and buy a currency in size or sell in large quantities, either using their own accounts or through agency banks. However, the amount of firepower a central bank has is directly tied to the size of its liquid foreign currency reserves. However I am not sure that State Bank of Pakistan will waste its precious FE reserves to buy back Pakistan Rupee.
Another way is to increase the interest rates. Currency Traders sell a low yielding currency and buy a high yielding currency in order to profit on the difference. Thus in order to make its currency more attractive to investors and harder to sell by speculators, a central bank can try to ensure that its currency is high-yielding through official rates or manipulating the liquidity in forwards markets.
In my humble opinion main reason for the continued decline of Pak Rupee against the US Dollar is continued current account deficit and exports failing to keep up with imports. As evident from the following.
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Pakistan’s current account deficit widens by 90pc
February 19, 2017
Finance No comments
KARACHI: Pakistan’s current account deficit has widened sharply by 90 per cent to $4.71 billion during first seven months of current fiscal year, according to summary of Balance of Payment (BoP) issued by State Bank of Pakistan (SBP).
http://www.pkrevenue.com/tag/current-account-deficit/
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KARACHI: State Bank of
Pakistan released the economic data for the first seven months of the current fiscal year.
Pakistan’s current account deficit widened by 90% in the first seven months (Jul-Jan) of 2016-17, standing at $4.72 billion compared with $2.48 billion in the same period of the previous year, according to data released by the State Bank of Pakistan (SBP) on Friday.
https://timesofislamabad.com/71042-2/2017/02/18/
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ISLAMABAD: The volume of Pakistan’s trade deficit has rose to around 20 per cent as exports slumped by around four per cent during first five months (July-November) of the on-going financial year (FY2016-17).
The country exported goods worth $8.2 billion during July-November period of the fiscal year as against $8.5 billion of the corresponding period of the previous year, according to the fresh data of Pakistan Bureau of Statistics (PBS).
Exports are continuously declining since this government took charge in June 2013, falling from $24.5 billion in fiscal 2012-13 to $20.8 billion during previous financial year 2015-16.
The country’s imports have recorded an increase of 8.83 per cent during July-November period of the FY2017. Pakistan imported goods worth $19.96 billion during the five months of the current financial year as compared to $18.35 billion of the same period of the last year.
The trade deficit has widened by 19.9 per cent during July-November period of the financial year. Country’s trade imbalance was recorded at $11.78 billion in the period under review as against $9.8 billion of the corresponding period of the last year.
According to the PBS figures, exports increased by 6.2 per cent to $1.76 billion in November 2016 from $1.66 billion in the same month of the last year. Meanwhile, the imports went up by 10.81 per cent to $4.26 billion in November 2016 from $3.8 billion in November 2015. Therefore, trade deficit was registered at $2.49 billion during November 2016 as against $2.18 billion in the corresponding month of the last year, showing an increase of 14.31 per cent.
http://arynews.tv/en/pakistan-trade-deficit-widens-in-first-five-months-of-fy-2016-17/
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