Pakistani rupee continues to gain strength against US Dollar

ISLAMABAD: Pakistani Rupee on Wednesday appreciated by 05 paisa against the US Dollar in the interbank trading and closed at Rs 280.97 against the previous day’s closing of Rs 281.02.

However, according to the Forex Association of Pakistan (FAP), the buying and selling rates of the dollar in the open market stood at Rs 281.40 and Rs 282.90, respectively.

The price of the Euro decreased by Rs0.62 to close at Rs 319.81 against the last day’s closing of Rs 320.43, according to the State Bank of Pakistan (SBP).

The Japanese yen came down by 01 paisa and closed at Rs 1.96, whereas a decrease of Rs 1.14 was witnessed in the exchange rate of the British Pound, which was traded at Rs 376.08 as compared to the last day’s closing of Rs 377.22.

The exchange rates of the Emirates Dirham and the Saudi Riyal decreased by 01 paisa each to close at Rs 76.49 and Rs 74.90 respectively.

The United States Dollar (USD) is the official currency of the United States and a pillar of the world financial system. Its origin goes back to the Coinage Act of 1792, but its rise to global fame gained momentum after World War I and was consolidated by the Bretton Woods Agreement of 1944. Under this agreement, other leading currencies were tied to the US Dollar, which itself was tied to gold, making the dollar the major reserve currency. Though the direct gold peg was subsequently discarded, the dollar’s established status and the dominance of the US economy and financial markets have helped to maintain its preeminence in international finance.

The US Dollar is absolutely vital to global trade because it is the world’s leading reserve currency. Central banks worldwide keep large proportions of their foreign exchange reserves in US Dollars, which provides a steady demand to sustain its value and liquidity. In addition, most international transactions, especially for major commodities such as oil and gold, are denominated and settled in US Dollars. Such extensive use makes international trade easier through less frequent necessity for currency exchange, thus diminishing costs of transaction and increasing the efficiency of the international market.

Apart from its usefulness as a means of exchange, the US Dollar is also a “safe haven” currency. In times of economic unrest or geopolitical turmoil, investors would opt for the relative safety of dollar-denominated instruments, enhancing further its demand and value. The large and liquid financial markets of the United States also make dollar-denominated transactions and investments easy, thus becoming an integral currency for global finance. This combination of features – reserve currency status, ubiquity of acceptance, safe-haven demand, and deep financial markets – reinforces the vital and long-term role of the US Dollar in making and influencing international trade.