Comparing Pakistan’s Open Market Forex Rate with Other Global Currencies: An Analysis

Pakistan is a developing country located in South Asia. The country’s economy is heavily dependent on its imports and exports, which makes the exchange rates of its currency, the Pakistani rupee (PKR), crucial to its economic stability. The open market forex rate is the rate at which a currency can be exchanged for another in the open market, without the intervention of any regulatory body. In this article, we will compare Pakistan’s open market forex rate with other global currencies and analyze the factors affecting the exchange rate.

The US Dollar (USD) is the world’s most traded currency and is used as a benchmark for global currencies. The PKR has been depreciating against the USD for the past few years. In 2018, one USD was equal to around 115 PKR, while in 2021, the exchange rate has reached almost 160 PKR per USD. This depreciation can be attributed to several factors, including political instability, high inflation, and a large trade deficit.

The Euro (EUR) is the second most traded currency in the world and is used by 19 European countries. The exchange rate between the PKR and EUR has remained relatively stable over the years. In 2018, one EUR was equal to approximately 136 PKR, while in 2021, the exchange rate has fluctuated between 194-205 PKR per EUR. The stability of the exchange rate between the PKR and EUR can be attributed to the strong trade ties between Pakistan and the European Union (EU).

The Pound Sterling (GBP) is the currency of the United Kingdom and is one of the oldest currencies in the world. The PKR has been depreciating against the GBP for the past few years. In 2018, one GBP was equal to around 150 PKR, while in 2021, the exchange rate has reached almost 214 PKR per GBP. This depreciation can be attributed to the same factors affecting the PKR-USD exchange rate, including political instability and a large trade deficit.

The Japanese Yen (JPY) is the currency of Japan and is the third most traded currency in the world. The exchange rate between the PKR and JPY has remained relatively stable over the years. In 2018, one JPY was equal to approximately 1.03 PKR, while in 2021, the exchange rate has fluctuated between 1.4-1.5 PKR per JPY. The stability of the exchange rate between the PKR and JPY can be attributed to the strong trade ties between Pakistan and Japan.

Factors Affecting the Exchange Rate

Exchange rates are affected by various factors, including economic and political factors. The following are the major factors affecting the PKR exchange rate:

1. Political Stability: Political instability in Pakistan has a significant impact on the exchange rate. Investors are hesitant to invest in a country that is politically unstable, leading to a decrease in the demand for the PKR.

2. Inflation: High inflation in Pakistan leads to a decrease in the purchasing power of the PKR and a decrease in the demand for the currency.

3. Trade Deficit: Pakistan has a large trade deficit, which means that the country imports more than it exports. This leads to a decrease in the supply of the PKR and an increase in the demand for foreign currencies, leading to a depreciation of the PKR.

4. Interest Rates: Interest rates also affect the exchange rate. Higher interest rates attract foreign investors, leading to an increase in the demand for the PKR and an appreciation of the currency.

Conclusion

In conclusion, the exchange rate of the PKR is crucial to Pakistan’s economic stability. The PKR has been depreciating against major global currencies, including the USD and GBP, due to various economic and political factors. However, the exchange rate between the PKR and the EUR and JPY has remained relatively stable over the years due to strong trade ties. The factors affecting the PKR exchange rate include political instability, high inflation, a large trade deficit, and interest rates. It is important for Pakistan to address these factors to stabilize the exchange rate and promote economic growth.