Rupees, the Pakistan's currency unit, has swung up to PKR 102/US$ from the 112/US$ in last two years. The economic fundamentals (one is remittances inflows and resulting foreign exchange reserves) explain this appreciation partially and a large part of it remains unexplained (Residual). Other than, economic, the political factors seems in operation. What specific factors you think responsible for appreciated Rupee?
RUPEE PK IS STABLE. There does not appear to be any statistically significant increase in value. For the past 182 trading days, there are no significant increase in value of the rupee. There were 9 instances of significant loss in value. nine out of 182 would not give cause for concern:
p = (s + 1) / (n + 2)
= (173 + 1) / (182 + 2)
=174 / 184
=0.9456
The loss was: 1 - p = 0.5434. This is still within 5% fluctuation in negative direction. For many traders, this would still be considered tolerable. The tendency under the Weibull test shows that the value of the Rupee will be weaken with respect to time: beta = -22.65. The explanation of the movement of the current exchange rate---as USD compared with other major currencies--is with the USD itself.
LOOK AT THE US not the Rupee for explanation if the fundamentals in Pakistan is stable. See http://community.xe.com/blog/xe-market-analysis/xe-market-analysis-north-america-jun-08-2015
http://community.xe.com/blog/xe-market-analysis/xe-market-analysis-north-america-jun-08-2015
http://www.exchangerates.org.uk/USD-PKR-exchange-rate-history.html
Thank you Paul. I have this in my mind, my concern is that, of a group of economists and social scientist, opinion is there that current PKR exchange rate is misaligned with it is equilibrium value based on its fundamentals (and it has evidence to be so). My interest is in identifying the factors behind this overvalued (may be you can call it currency manipulation).
Do you think persistent decline in inflation rate has played any role, at least theoretically?
Dear Dr. Sahab It is pleasure having you on here at RG. Let me take this opportunity t congratulate you on your moving abroad.
Dr. Sahab, my concern is actually on the decline of inflation itself in the context of "Exchange rate anchorage" of inflation.
Who else can be better understanding it than you. Look forward for your expert opinion on it.
Sajid
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