Over time, the USD/PKR currency combination has shown significant volatility, particularly in the years immediately following 2021 due to a variety of political and economic events.
With its regulated floating exchange rate mechanism, the Pakistani Rupee (PKR) is a currency that may be traded on the foreign exchange market and is actively maintained by the nation’s central bank.
It should be mentioned that the USD/PKR pair is not beneficial for day traders due to its low liquidity and classification as an exotic pair. Longer-term traders can still locate trading opportunities, though.
One of the main international currencies that nations use to maintain their foreign reserves is the US dollar. The money is widely used in international business and trade.
We had to consider into a number of important political and economic aspects, including trade balance, national debt, interest rates, inflation, economic growth, and more, in order to forecast the value of USD/PKR. We’ll also examine the USD/PKR price chart in this article.
Factors influencing the USD’s value
The value of the US dollar, which is a universal currency, is determined by a wide range of variables that can be broadly classified into two categories: factors related to the demand for the USD worldwide and factors pertaining to the US economy and politics. The potential creation of the BRICS (Brazil, Russia, India, China, and South Africa) currency and Chinese efforts to promote the Chinese Yuan as an international currency backed by gold reserves are only two examples of the numerous measures to curtail the USD’s hegemony in the world economy. But all of these ideas have fallen flat, and by 2024 the USD will probably still be the world’s reserve currency.
Global investors trade USD in the Forex markets while keeping a close eye on political and economic developments in the US. Therefore, the value of the USD immediately reflects everything that occurs in the US economy. Markets for financial products are quite efficient. Let’s go into more depth about these political and economic aspects.
Rates of Interest
The Federal Reserve, sometimes known as the Fed, is the US central bank and sets interest rates. Central banks use interest rates as a tool to manage the money supply and, in turn, directly affect the value of the currency.
A rise in interest rates makes loans more costly for individuals and businesses, which causes them to borrow less money from the banks. The economy thus sees a decrease in the flow of money and an increase in the purchasing power of the dollar. High rates can have a cost, though, as people begin to save for necessities and many businesses suffer when less money is put into the market. What one guy spends is what another one earns.
From late 2020 to 2022, the US economy benefited from low interest rates (0.25%). However, the US central bank had to sharply raise rates in order to combat rising inflation. The rates went from 0.25% to 5.5% over time. It’s likely that through 2024 the high rates will remain in place. It is good for the USD’s value in the short run but could be detrimental to it in the long run because high interest rates generally depress the economy.
Financial Aspects
The economy of the United States is enormous. Growth Domestic Product, or GDP, exceeds 25 trillion US dollars. And this figure continues to rise. A nation’s overall economic production is gauged by its GDP. It calculates the market value of all products and services produced inside a country’s boundaries over a specific time frame, usually a year or a quarter. Let us now examine the trends in the USA’s GDP over the last many years. The data for 2023 are not yet available.
Year: 2018; 2019; 2020; 2021; 2022
GDP growth rate2.9%2.3% – 2.8%1.9% 5.9%
Rates of Inflation
A significant factor influencing the dollar’s value relative to the Pakistani rupee is inflation. When prices for goods and services rise, it is referred to as inflation and implies that more money is needed to buy the same items as before. Prices in the US grew by 1.2% in 2020 and 4.7% in 2021, respectively. The costs increased by an additional 8% in 2022. The Covid-19 epidemic and historically low borrowing rates are to blame for this price surge. Low interest rates encourage consumers to take out more loans, which can raise costs because people have more money in their pockets. The US economy will probably continue to struggle with inflation in 2024.
Balances of Trade
The strength of the currency is significantly influenced by the trade balance. The trade deficit of the United States has been rising rapidly in recent years, and in 2022 it will reach a record high of 945.32 billion USD. The deficit increased from 393.77 billion USD in 2009 to 446.86 billion USD in 2012.
The USA’s growing trade deficit is probably going to persist in the next years, which might put a lot of pressure on the USD. On the other hand, American government policy has shifted significantly in favor of boosting domestic production in order to reduce imports.
Debt
The United States’ overall debt has risen to almost 33 trillion US dollars, much exceeding the GDP (25 trillion USD) of the entire nation. Both public and government debt total 33 trillion. This debt has the potential to affect the USD value in a number of ways. First of all, it affects investor confidence since fewer people will put money into a currency that is overextended. Interest rates may be raised by governments in an effort to control the amount of debt.
2024 Presidential Elections
The value of the US dollar can fluctuate significantly in response to presidential elections. A nation’s economic trajectory will be largely determined by the policies of the candidates regarding trade, immigration, monetary policy, and the military budget.
The Trump administration has taken a different tack from Obama’s, which was primarily concerned with advancing global commerce and removing obstacles in its path. Biden is likewise in favor of returning manufacturing to the United States. The government makes significant investments in the manufacturing of semiconductors, processors, and green technology. Since both republicans and democrats strongly support reducing the negative trade balance, this strategy is expected to continue to be popular in the USA until 2024 and beyond.
Worldwide Elements
The US dollar is a worldwide currency, and its value can be greatly impacted by continuing transactions in other markets. It is anticipated that armed hostilities in Israel and Ukraine, two US allies, would continue until 2024. Consequently, increased funding for military and humanitarian help will be demanded of the US government. The value of the USD may suffer as a result of the increased expenditure on war.
Factors influencing the Pakistani Rupee’s valuation
1948 saw the introduction of the Pakistani Rupee (PKR), the country’s official currency. The currency has depreciated in value relative to other major currencies since its introduction. The Pakistani Rupee steadily lost purchasing power until 2017. Nonetheless, the currency’s worth in relation to the USD has significantly decreased since the start of 2018. From roughly 105 Rupees in 2017 to almost 300 Rupees in 2023, the value of a single US dollar increased. There are causes for the sharp decline in the value of the currency. We also need to talk about strong fundamentals and technicals before we can forecast the USD/PKR values for 2024.
Pakistan’s Inflation
One of the most important factors to consider when estimating the value of a currency is inflation, since data on inflation indicates how much a currency has lost purchasing power. In recent years, Pakistan has seen inflation that is significantly higher than that of the US. Let’s examine the following inflation data:
The years 2017–2018–2019–2020–2021–2022
Pakistan’s rate of inflation5.1%, 10.6%, 9.7%, 9.5%, and 19.9%
The USA’s rate of inflation2.1% and 2.4%1.8% 1.2 percent4.7% 8%
Although the exact inflation figures for 2023 are not yet available, we may anticipate that the current pattern will continue. In 2023, the value of the Pakistani Rupee in relation to the US Dollar significantly decreased. We’ll go into further detail about this using the charts below.
Rates of Interest
The control of inflation is one of the primary responsibilities of central banks. The economy as a whole and businesses are most harmed by volatile and high inflation. The inflation table shows that there has been a lot of inflation in Pakistan lately. And the central bank has put high interest rates in place to combat it.
Let’s now examine Pakistan’s interest rates and inflation.
The years 2017–2018–2019–2020–2021–2022
Pakistan’s rate of inflation5.1%, 10.6%, 9.7%, 9.5%, and 19.9%
Pakistan’s interest rate10% 5.75%13.25%9.75%, 16%, and 7%
As you can see, there is a correlation between inflation and interest rates. It is anticipated that the Pakistani Rupee will continue to see high rates of inflation in 2024, which would be followed by high central bank interest rates.
Pakistan’s economic circumstances
Pakistan’s economy is substantial. Nevertheless, the nation has a very huge population, and the whole GDP is split among over 240 million people, yielding a fairly modest amount of approximately 1.5k USD. The nation has high rates of poverty, and rapid economic growth is required to reduce these levels. Fortunately, Pakistan’s economy has grown well in recent years, with 2020 seeing the lowest growth rate (-0.94). But the pace of progress isn’t quick enough to pull millions out of poverty. Let’s examine the following GDP annual growth rate chart:
The years 2017–2018–2019–2020–2021–2022
Pakistan’s Annual GDP Growth Rate6.61 % 4.61%3.12% – 0.94%5.97% 5.77%
The trade balance of Pakistan
The amount of money a nation gains or loses from trade is expressed as its trade balance. Additionally, it is determined by deducting import expenses from export revenue. A positive trade balance boosts the value of the national currency and is beneficial to the economy; a negative reading devalues local currency.
Pakistan is a consumer nation that, according to its official financial figures, has had a negative trade balance for the vast majority of the years. Furthermore, it should be noted that projections are challenging due to the nation’s annual sharp fluctuations in its trade deficit. Let’s examine the trade balance table for the most recent few years.
The years 2017–2018–2019–2020–2021–2022
Trade balance in US dollars: -35.01 billion; -37.65 billion; -27.31 billion; -24.76 billion; -40.90 billion; -37.42 billion
National Debt of Pakistan
A nation’s local currency may suffer from a high national debt for a number of reasons. Most nations have some national debt, but very high or unmanageable amounts can have a detrimental impact on the value of the local currency. Because of this, investors are continually concerned about rising debt levels.
A government’s ability to enact tangible policies to encourage economic growth and exports will probably be limited if it finds itself having to devote a significant amount of its revenue to debt payment.
Although Pakistan has a significant debt load, it should be noted that the debt to GDP ratio is not as high as it is in the US. With a GDP of 25 trillion USD, the US has 33 trillion USD in debt. Although Pakistan’s GDP for 2023 has not yet been released, we can look at the debt to GDP ratio for 2022. Pakistan’s GDP was valued at US$376.53 billion in 2022, while the country owed US$183.57 billion in national debt.
Investors are concerned about Pakistan’s debt since it continues to rise. And by 2024, it’s expected to surpass 280 billion USD.
Year: 2018; 2019; 2020; 2021; 2022; 2023
national debtUS$91.86 billion at the timeUS Dollars: 122.75 billionUS$136.77 billion at that timeUS$148.41 billion at the time183.57 billion dollars in the US234.41 billion dollars in the US
US dollar versus the rupee of Pakistan
Looking at the weekly chart of the US Dollar versus Pakistani Rupee, we can observe that the Rupee has been steadily declining in value. And that tendency quickened starting in early 2022. The trend is probably going to continue, and in 2024 the USD/PKR rate is probably going to stay extremely volatile, fluctuating between 280 and 380 levels.USD PKR
Concluding
In summary, a variety of factors influence the US dollar and the Pakistani rupee. The US dollar is characterized by a massive and growing trade deficit, a significant national debt, and high interest rates. In addition, there are international issues like the wars in Israel and Ukraine and worldwide shortages that could affect the value of the US dollar, including presidential elections. However, Pakistan faces unique difficulties. Pakistan has enormous trade deficits, rising annual government debt, and sharply rising interest rates and inflation starting in 2022. We may forecast that the USD/PKR exchange rate will be extremely volatile for 2024, fluctuating between 280 and 380 levels, if we take into account fundamental and technical variables.
