Pakistani rupee sinks to record low against dollar

[JohnyD]

And people say US is a sinking ship; they are printing dollars like tissue papers...BUT see the reality, when the US is in trouble they actually get strong…their currency get strong….and we developing countries are always at the receiving end all the time….

IMO, strong and growing US economy is good for developing and underdeveloped nations….

 

[KRAIT]

Pakistan will pay $ 350 million by Feb 26. It will create a lot of trouble then too.

 

[Azazel]

Okay need to clarify a couple of things before I explain why I said that.

1) A devalued currency doesn't necessarily means a bad economy (Japan, South Korea)
2) I never said Pakistan Economy is good. Its needs a lot of improvement.

Now the economy and currency devaluation works in cycles.

Let me use this example to to explain what I am saying. Lets take a case of India (lot of Pakistanis will needlessly troll if I use Pakistan as an example. Want to avoid that.). India has deficit due to imports > Exports. Now if this becomes more i.e. imports >> exports. Rupee devaluates. Than what happens. Imports reduce (since people can't buy the imported items in same quantity - assuming the purchasing power to be same). Exports increase since they become more competitive in international market. Now lets say in a hypothetical scenario this continues to a point where Exports > Imports. Rupee will strengthen and the cycle will go through but this time in opposite direction. Now in some case (China is a good example) if your industry is strong or you innovate (US) then you continue to grow i.e. Exports >> Imports. This is 101 of Economics.

The point I made about Pakistani currency is in this context. So devaluation is not bad if you can take advantage of it. And when you say imports will lead to lot of burden on common people in Pakistan. Then present day Economics has nothing to do with common people. That is 102 of economics. Heck if the world cared even a bit about common people we will all be socialists.


Disclaimer - There are a lot of other dependencies that come to play here but I am avoiding them to keep this explaination very simple

No need to go all there,let me be clear on one thing,Pakistan's currency is not devaluing,but its depreciating.Both are very different."Devaluation" means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, "Depreciation" is used to describe a decrease in a currency's value (relative to other major currency benchmarks) due to market forces, not government or central bank policy actions.

Here, Pakistan's currency is depreciating against the dollar because of the rapidly declining Forex reserves in Pakistan.This lack of Forex reserves forces importers or investors to buy more and more dollars.This causes further depreciation.As in the case of a commodity market,lack of availability of a commodity forces its prices to go up.Here, Dollar is another commodity and its prices are going up because of the shrinking forex reserves.If it got too low they will have a Balance of Payment crisis and some one might need to bail them out,As in this case it is most likely IMF.We had a similar situation back in 1990s.

 

[Sugarcane]

Switzerland Khapay, Switzerland Khapay

 

[MST]

No need to go all there,let me be clear on one thing,Pakistan's currency is not devaluing,but its depreciating.Both are very different."Devaluation" means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, "Depreciation" is used to describe a decrease in a currency's value (relative to other major currency benchmarks) due to market forces, not government or central bank policy actions.

Here, Pakistan's currency is depreciating against the dollar because of the rapidly declining Forex reserves in Pakistan.This lack of Forex reserves forces importers or investors to buy more and more dollars.This causes further depreciation.As in the case of a commodity market,lack of availability of a commodity forces its prices to go up.Here, Dollar is another commodity and its prices are going up because of the shrinking forex reserves.If it got too low they will have a Balance of Payment crisis and some one might need to bail them out,As in this case it is most likely IMF.We had a similar situation back in 1990s.

Semantics. Both have actually the same effect. Anyways I am not saying you are wrong. What you say is right. Infact in Pakistan's case there is a high probability that there may be a BOP crisis.

But the fact stays. Devaluation/Depreciation gives the country an opportunity. Question is can they use that opportunity. That is whole basis of free market economy. Thats how wealth flows across the globe.

 

[Azazel]

It's not so simple. You can't suddenly become a lot more competitive just because your currency is depreciating.

Look at the Chinese Yuan, it has actually been appreciating against the dollar for the whole past decade.

XE.com - CNY/USD Chart

Currency depreciation does give a small boost to exports yes, however underlying competitiveness depends on the entire system within the country.

If you want to be more competitive, you have to reform the underlying system. And optimize the entire supply chain.

You know,your currency was forced up by US policy of Quantitative Easing.US is printing $hit load of cheap money out of thin air and China is forced to buy all that to export its goods to US.All this excessive money means inflation,so to prevent the inflation going up in China,Chinese Govt is allowing RNB to appreciate.Don't pretend that you love your currency going up,because the whole world knows that's not the case.

 

[Azazel]

Semantics. Both have actually the same effect. Anyways I am not saying you are wrong. What you say is right. Infact in Pakistan's case there is a high probability that there may be a BOP crisis.

But the fact stays. Devaluation/Depreciation gives the country an opportunity. Question is can they use that opportunity. That is whole basis of free market economy. Thats how wealth flows across the globe.

I don't care whether they uses that opportunity or not.The fact is depreciation of the currency doesn't necessarily increase competitiveness of an economy.As the @Chinese-Dragon said it depends on the underlying system.Rapid depreciation of currency usually shows weak fundamentals of the economy.How ever if a country is intentionally devaluing its currency by simply printing more money(Like Japan and S Korea) that's a different matter and that is definitely done to increase the competitiveness as you have mentioned.

 

[Chinese-Dragon]

Don't pretend that you love your currency going up,because the whole world knows that's not the case.

When did I pretend that?

We are having a trade surplus even when our currency is soaring upwards.

India is having a trade deficit even when your currency is plunging downwards.

It's about the underlying system. Currency movements can only help you so much.

Personally, I just want stability. If it's going up our down I just want it to be stable.

 

[Azazel]

When did I pretend that?

We are having a trade surplus even when our currency is soaring upwards.

India is having a trade deficit even when your currency is plunging downwards.

It's about the underlying system. Currency movements can only help you so much.

Personally, I just want stability. If it's going up our down I just want it to be stable.

It's no rocket science.Its because of the recession.That's exactly how the trade behave during a global recession.Trade surplus economy accumulates more surpluses and trade deficit country widens their deficits.Both are unwanted consequences,trade need to be properly balanced for long term stability.

 

[MST]

And people say US is a sinking ship; they are printing dollars like tissue papers...BUT see the reality, when the US is in trouble they actually get strong…their currency get strong….and we developing countries are always at the receiving end all the time….

IMO, strong and growing US economy is good for developing and underdeveloped nations….

The thing with US dollar is that of "Heads I win Tails you lose"

If the US economy goes down so goes the world economy. Every other country is going to Tank. Something like that happened in 2008. In such bad situations the only one (ironically) that can be trusted (to give your investment back with interest) is the US Govt. Which means nothing can be trusted more than the US dollar and the US govt bonds. Huge demand of Dollars in such situation leads to appreciation of dollar.

If the US economy goes up US dollar goes up. That is self explanatory.

As long as the USD remains the world currency the USD will always be coveted irrespective of how much it is printed.

 

[A1Kaid]

Shopping in Pakistan has always been favorable to me, I get a lot of shopping done when I visit Pakistan.

 

[haviZsultan]

The Pakistani rupee on Monday sank to an all-time low against the US dollar over forex reserve fears as the country repayed $146 million to the International Monetary Fund.

The rupee fell to 100.1 to the greenback in trading in Karachi, down from 99.30 on the open market Friday, and has now lost 39 percent of its value against the US currency since March 2008.

"We have traded the dollar at 100.1 rupees, although there is a slight difference on the open market," said currency dealer Mohammad Arshad.

The official inter-bank rate for the dollar is 98 rupees, but Mohammad Sohail, who heads brokerage firm Topline Securities, confirmed it had crossed 100 on the open market.

Pakistan had a $10.7 billion IMF loan until September, but had drawn only about a third of it. The government has indicated it would not seek a new loan.

Pakistan repaid $145.79 million to the IMF on Monday and is scheduled to repay another $375 million on February 26, according to Syed Wasimuddin, spokesman for the country's central State Bank.

So far Pakistan has repaid $2.57 billion, $1.5 million this fiscal year, ending June 30, according to the central bank.

"The rupee is likely to remain under pressure because of IMF repayments," said Sohail.

"The foreign exchange reserves have declined to $8.7 billion as of January 31 from $10.8 billion at end-June 2012," said the central bank last week.

The IMF last November urged Pakistan to reduce its large budget deficit to bolster the struggling economy's resiliency, noting that foreign exchange reserves under $10 billion were below adequate levels.

Pakistani rupee sinks to record low against dollar | The Nation

Congrats to Zardari, PPP, and MQM.

Not again. I doubt things will ever improve with things being the way they are. A sink in ruppee also means a reduction in GDP per capita as Ruppees are converted to $ for the estimate. In ruppees it is only rarely counted.

 

[muse]

Not again. I doubt things will ever improve with things being the way they are. A sink in ruppee also means a reduction in GDP per capita as Ruppees are converted to $ for the estimate. In ruppees it is only rarely counted.

This is a Defense forum, but no economy No Defense, No nothing -- There is an election coming up, please don't just complain, your vote makes a difference - but only if you vote - Vote for the Economy you wish we had - make it the number 1 issue, everything else flows from Economy. An Economy open to Pakistanis, not bureaucrats, not politicians, but to businessmen, integrated with the world, an economy where the property of all is protected, an economy that generates social and political stability. It's all up to you --- Whatever party you vote for so long as you do not vote PPP or PML-N, you know these people, one has extracted "revenge", the other hopes to do the same - can Pakistan survive more revenge?

 

[muse]

Friends, recall we were discussing the IMF mission a week or so back, call that that the IMF thought the currency over valued by 10% -
now this, read it carefully :

KSE smashes all records, gains 71 pts

Staff Report

KARACHI: The Karachi stock market made another historic high level by crossing the 17,500 points level on the first trading day of the week Monday driven by buying in exploration and production heavy weights, and rising trend in international oil prices kept investor sentiment positive.

The Karachi Stock Exchange (KSE) 100-share index gained 70.60 points or 0.40 percent to close at 17,548.54 points as compared to 17,477.94 points of the previous session. The KSE 30-share index was up by 74.29 points to close at 14,325.44 points as compared with 14,251.15 points of the previous session.

“Rally in the market continued with key benchmark index crossing yet another psychological mark of 17,500 points,” said Topline Sec dealer Samar Iqbal. The 100-share index gained mainly led by heavyweight Oil and Gas Development Company, which rose by Rs 4.”

Jahangir Siddiqui and Co Ltd witnessed renewed interest in anticipation of better earnings, she said and added that lower-than-expected result of Dera Ghazi Khan Cement caused its share price to decline marginally.

The market turnover gained 3.29 percent and traded 278.24 million shares after opening at 269.36 million shares. The overall market capitalisation surged 0.41 percent and traded Rs 4.396 trillion as against Rs 4.378 trillion. Gainers outnumbered losers 178 to 157, while 28 stocks were unchanged.

“Exploration and production heavyweights on renewed value buying, and rising trend in international oil prices kept the index on the gaining ground,” said Escorts Capital Chief Operating Officer Husnein Asghar Ali. “As the market continued the historic run-up, gains on the benchmark undoubtedly averted the likely fall in the wider market mainly in the stocks likely to get effected by the trend change in monetary stance.”

The KMI 30-share index gained 152.22 points to close at 30,442.89 points from its opening at 30,290.67 points. The KSE all-share index closed with a gain of 50.48 points to 12,407.73 points as against 12,357.25 points of the previous session.

Analysts suggested selective accumulation in the frontline stocks, which are likely to gain from currency weakening, while low-priced stocks mainly those dependant on monetary easing can be looked for offloading.

Jahangir Siddiqui and Co was the volume leader in the share market with 25.49 million shares as it closed at Rs 17.78 after opening at Rs 18.04, shedding 26 paisas. Maple Leaf Cement traded 24.49 million shares as it closed at Rs 18.05 from its opening at Rs 17.30, gaining 75 paisas. PTCL traded 17.27 million shares and closed at Rs 19.87 as compared to its opening at Rs 20, falling 13 paisas. PIAC traded 16.99 million shares as it closed at Rs 4.50 against its opening at Rs 4.43, rising seven paisas.

 

[tarrar]

Thank GOD no more loans will be taken & IMF is also refusing to give new loans to Pakistan. If only Pakistan resources were used properly then Pakistan would had never taken such big loans. Even if Gen. Musharraf's made Pakistan was run Pakistan wouldn’t had suffered but unfortunately we are ruled by the corrupt & evil who still till date say "PPP rule was the best & we achieved a lot" I don't see any achievement there are only big loss, damages to Pakistan & massive lies to cover the politicians crimes & corruptions.

The question is where was all that heavy loan used, we don't see any projects in Pakistan, so it clear that the loans has gone all in the pockets of corrupt & evil politicians.

These politicians only deserve death.