Pakistani rupee gains ground against US Dollar

ISLAMABAD: Pakistani rupee on Thursday appreciated by 06 paisa against the US Dollar in the interbank trading and closed at Rs 283.66 against the previous day’s closing of Rs 283.72.

However, according to the Forex Association of Pakistan (FAP), the buying and selling rates of the dollar in the open market stood at Rs 284.85 and Rs 285.95 respectively.

The price of the Euro increased by Rs3.69 to close at Rs 332.67 against the last day’s closing of Rs 328.98, according to the State Bank of Pakistan (SBP).

The Japanese yen went up by 02 pasia and closed at Rs1.97, whereas an increase of Rs3.67 was witnessed in the exchange rate of the British Pound, which was traded at Rs 390.04 as compared to the last day’s closing of Rs 386.37.

The exchange rates of the Emirates Dirham and the Saudi Riyal came down by 02 and 01 paisa to close at Rs 77.23 and Rs 75.63.

Also read: Gold rates go up in Pakistan

The United States Dollar 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 USD 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 USD. 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 USD 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 USD in making and influencing international trade.