PkR exchange rate

On the back of better than anticipated improvement in the country’s external stability parameters, the PkR exchange rate volatility – as measured by the monthly standard deviation of PkR-US$ parity – has dropped. The improvement in the “core” external parameters is evident from the 67.8%YoY contraction in the cumulative Current Account deficit during 9MFY10. During the same time frame, strong inflow of home remittances (up 15.8%YoY) and contraction in the trade deficit (down 26.4%YoY) has lowered Pakistan’s external vulnerability and eased pressure on the PkR exchange rate, where the PkR has appreciated by 1% against the US$ in the past two months. Despite this appreciation, it is interesting to note that the “downward” currency risk is slowly inching up.