The Real Effective Exchange Rate (REER) of Pakistan decreased to 96.74 in December 2021.
According to the latest monthly data published by the State Bank of Pakistan (SBP), the decline indicates a marginal drop from 98.56 recorded in November 2021.
The REER index was recorded at 96.74 in Dec 21 as compared to 98.56 in Nov 21. For details see https://t.co/qGkm7oT4v5 pic.twitter.com/I0FC2fwCW3
— SBP (@StateBank_Pak) January 20, 2022
The REER is the weighted average of a country’s currency compared with an index or basket of other major currencies. It differs from the spot exchange rate, which is the current amount to exchange one currency for another on the earliest possible value date. While the spot exchange rate depicts the current market price, the REER is an indicator of the value of a currency compared to its major trading partners.
The REER can be used to assess whether a currency is overvalued or undervalued. If it is greater than 100, it indicates that the value of the currency is overvalued, while being less than 100 means that it is undervalued.
At 96.74, Pakistan’s current REER value suggests that the Pakistani Rupee (PKR) is now undervalued.
