Rupee firms against US dollar

[S.Bukhari]

The smaller the value of a currency unit falls, the more units needed to buy the same goods. This is inflation. Comprende? Now take a stock of the value of the PKR and inflation rate over the last several years.

Besides, all the claims of FDI in the tens of billions of dollars are nowhere to be found in reality.

Inflation is always related to the circulation of money. That come with goods and services of any country. We measure inflation with purchasing power of people. If purchase power increases thats mean demand of goods increase is well. So price goes up. Bt if money is not distribute to people of country inflation effects poor more and rich get richer.

 

[VCheng]

Inflation is always related to the circulation of money. That come with goods and services of any country. We measure inflation with purchasing power of people. If purchase power increases thats mean demand of goods increase is well. So price goes up. Bt if money is not distribute to people of country inflation effects poor more and rich get richer.

You are talking about the situation where too much money is chasing too few goods, leading to price inflation. That has nothing to do with the valuation of the currency in exchange (which is what we are talking about here), which is determined by the balance of payments of a country. If a country consumes more than it produces, the value of its currency falls, making its exports cheaper for others to buy and making imported good more costly in local markets to rebalance the system.

 

[S.Bukhari]

You are talking about the situation where too much money is chasing too few goods, leading to price inflation. That has nothing to do with the valuation of the currency in exchange (which is what we are talking about here), which is determined by the balance of payments of a country. If a country consumes more than it produces, the value of its currency falls, making its exports cheaper for others to buy and making imported good more costly in local markets to rebalance the system.

You first raised the point of deflation now you are going towards the balance of payments and imports and exports
Which according to you is the cause of devaluation in Pakistan what my point was that with every FDI the inflation increase due to the gap of demand and supply as purchasing power increases the demand increase as well so the inflation will also increase, in pakistan's case rupee was stable till 2008 but lost its value because of money laundering and lack of FDI there are some other factors as well but these two are the main reasons,
Low Tax to GDP ratio is one the factor as we are not a tax paying nation GOP hardly gets 8-9% tax which in my humble opinion is at least 9-10% less.

 

[VCheng]

in pakistan's case rupee was stable till 2008

Stable? The PKR has been on a steady fall in value for at least the last 40 years since the seventies!

 

[S.Bukhari]

You are talking about the situation where too much money is chasing too few goods, leading to price inflation. That has nothing to do with the valuation of the currency in exchange (which is what we are talking about here), which is determined by the balance of payments of a country. If a country consumes more than it produces, the value of its currency falls, making its exports cheaper for others to buy and making imported good more costly in local markets to rebalance the system.

Talking about inflation and currency fluctuations are two different things. But its related In short term as we depend on balance of payments whereas in long term we also see the other factors ,Not only inflation rate but also interest rate as well.

 

[S.Bukhari]

Stable? The PKR has been on a steady fall in value for at least the last 40 years since the seventies!

Sir gee I'm comparing it what PPP did in it's tenure, I'm not talking about 40 years and so on . In Musharaf's time PKR stayed around 60 isn't it???

 

[VCheng]

Sir gee I'm comparing it what PPP did in it's tenure, I'm not talking about 40 years and so on . In Musharaf's time PKR stayed around 60 isn't it???

Uncle Sam held it at 60 as part of the deal Sir. This is the history:

 

[Edevelop]

 

[AZADPAKISTAN2009]

NOT ACCEPTABLE ... pathetically high ...

1 Dollar = 102 rupee absurd ...

It was 1 Dollar to 5 Rupees when we had no infrastructure projects or F16 bazi giri


"100 Ruppes in 1960 Would have brought a Pakistani family probbaly groceries for 2 Weeks perhaps !!! I remember hearing from my grandfather's stories how people were paid few rupees per day or week and yet they lived comfortably

Today that can't get you a meal for 1 person or 2"

 

[Panther 57]

Hopefully this trend continue for 100 hundred days and $ and rs become equal in worth.

Hello its 10am please come out of dream lol

 

[Panther 57]

Will rupee appreciation last?
March 11, 2014
BR Research
The ongoing currency volatility is the highlight of the new governments economic management.
Indeed, it is a job well done by Mr. Accountant, as the currency has appreciated consistently ever
since he claimed that he would pull it back below the 100 mark. The rupee closed below 102
against the greenback yesterday.
Is it the desired outcome for an economy which needs to boost exports for creating employment
and curb imports to avert balance-of-payment crises? Yes, it could have been if the currency
appreciation would have been sustainable and our exports would have been naturally
competitive. But, there are doubts looming over the stability of the currency at these levels
whereas our major export-textile-is facing stiff competition from similar economies.
The prime reason for rupee to revert back sharply in the last week is the building up of SBP
reserves which are up from the low of $2.84 billion to $3.92 billion in a span of three weeks.
Some of the flows like CSF money were well anticipated but the market was surprised by around
$700 million jump in reserves in the third week of February. That is probably due to $750
million in aid coming from Saudi Arabia for some military related supports to the Kingdom.
That has changed the sentiments--punters, traders and treasurers are expecting reserves to build
up further on account of some negotiations going on with KSA and some GCC countries for
deferred oil payments. The government has almost finalized a deal with KSA for six months
deferred oil payments for a period of three years, similar deals are envisaged with Kuwait and
the UAE.
Together, these measures can give a cushion of over $5 billion in imports payment in next six
months and that can be continued for three years. Even, only with Saudis we can save $400-500
million per month in oil import payments for six months and forex reserves to be up by same
amount. No wonders, the SBP expects its reserves to reach by $4.7 billion by April end and $6.7
billion by June end (See BR Research article Whats behind rupee appreciation?" published on
Feb 18).
This information has changed the market sentiments, thereby creating a domino effect as many
who were holding back dollars for months are now offloading them to book the loss, and that has
resulted in further appreciation in the currency. Plus, the USD is falling internationally for a host
of reasons--the Indian rupee has appreciated by 3-4 percent last week against USD, so Pakistani
market is no exception.
But this sudden appreciation in currency without strong macroeconomic fundamentals has all the
potential to worsen current account balance and can make currency more volatile. Its a big loss
to exporters--if the dollar is down by one rupee, our textile exports lose out Rs12billion per
annum, so in the last week potential loss is close to Rs50billion. Soon the strong textile lobby
and large vote bank in Faisalabad may approach PML-N leadership to bail them out.

Plus, its going to be windfall for importers to enjoy higher margins by not fully passing on the
impact of rupee appreciation. Even if they do pass on the benefit then higher import demand may
put a pressure on balance-of-payment.
Mind you, there were talks of having import compression by higher duties on non-essential
imports and what is happening is an exact opposite of it. Then, there is less incentive for
expatriates to remit when the currency is overvalued. Although, right now people would send
more before the rupee falls below 100 but over the medium term remittances can fall.
In a nutshell, Ishaq Dars one point economic management to tame the currency can be
counterproductive. He must think along on the repercussions of overvalued currency. Its not far
when the lobbies would reach Nawaz Sharifs doors and Dar would be forced not to intervene too
much. May one also remind that the IMF is not going to like exporters becoming uncompetitive,
which makes one wonder how long will the rupee remain around or below the 100 dollar mark!

 

[SBD-3]

It is not the only thing, yes, but for Pakistan's situation, it is clearly a dominant factor.

??? Can you be more elaborative so as to how it is the dominant factor?

 

[My-Analogous]

What is "original value"? How far do you want to go back? The reason the PKR has steadily deteriorated in value over the last several decades is because of the adverse balance of payments and the weak economy, and the same weaknesses are just as true today as a few weeks ago.

It is not the only thing, yes, but for Pakistan's situation, it is clearly a dominant factor.

Mate in Pakistan Dollar value was not based on economic values but we can include some greed of selected people who manipulate currency value to gain their personal interest and trust me our economy is now is in stabilizing mode and in next two to three years we will be back in track and in six year if this progress properly we will be 300 to 350 billion economy (currently 225 billion-2013) and along China is investing 36 Billion in next five year and once electricity crisis will be over we will in full swing and that will be happen in somewhere 2018 to 2019. Based on assessment made by my friends who are working in financial institutions and research forums they stated that in today's economic condition Pk Rs. is some where 95 to 96 and Govt will cap the US at 98 b/c it will hurt our economy alot if we go below 98 in present condition

 

[ziaulislam]

One of the signs of an appreciating currency is low inflation. If the recent appreciation of the PKR is real and not a mere manipulation, then where is the corresponding drop in inflation? By all measures, inflation is running at high levels commensurate with the true rate of depreciation.

sir, i think you know that the only way to manipulate the currency is either injecting high amount of money (impossible for us as we have no large reserves) or sentiments.
here the rupee may have OVER corrected itself due to sentiment but not manipulation. the PPPP govt manipulated the currecy maintaining it using foreign reserves
inflation is pretty much contained and for developing economy inflation is normal thing. you cant compare us to mature econmy. the rapid drop you are talking would only be seen in mature economy
FDI has neared 10 billion dollars and foreign investment has risen to 120 million dollars a month
one other reason is this new report
Pakistan Development Fund: Another tranche of $750m makes way into public purse – The Express Tribune

in nutshell, its too early to say how good is the govt performing but atleast its doing better than previous one

 

[ziaulislam]

Stable? The PKR has been on a steady fall in value for at least the last 40 years since the seventies!

he meant stable when economy was doing good from 2001 to 2007-08(before the messed up PPPP govt)

ruppee is now at 99 state bank should maintain it there by buying dollars from open market