Rupee Not Alone in Surrendering to Dollar Supremacy

It’s been a tough ride for global currencies so far this year, which have taken a beating against a strengthening US dollar. Data on 11 currencies compiled by ProPakistani shows that while PKR was the worst performer from April 1, 2022 through Sept. 28, 2022, it’s not the only one depreciating against the greenback.

The dollar enjoys dominance in global international transactions and financial markets. The dollar comprised 60% of global official foreign reserves in 2021, according to a Federal Reserve article published in October 2021. The percentage of foreign currency debt denominated in US dollars has remained around 60% since 2010.

The Dollar Index, which measures the value of the greenback against six foreign currencies, has posted monthly gains so far this year, with the exception of May. As the dollar becomes stronger, it makes imports and debt repayments expensive in domestic currency terms. But why’s dollar gaining strength?

The dollar has benefited from a spike in demand as global investors seek shelter in US-denominated assets, which require dollars to buy, according to a World Bank blog in August 2022. Global central banks are raising interest rates, fueling recession concerns, while the Russia-Ukraine war that began late in February has not only disrupted supply chains but also stoked market volatility.

For the purposes of this analysis, the April 1, 2022, start date was used to incorporate the impact of the US Federal Reserve’s rate hike in the middle of March and fully capture the effects of the Ukraine war that intensified in March. The Fed has since been raising its policy rate to combat inflation in the world’s largest economy.

Performance of Global Currencies

The British pound (GBP) has plunged by 23% over the six-month period against the dollar. GBP recently slumped to a record low after the British government, headed by new Prime Minister Liz Truss, announced tax cuts. The Bank of England announced Sept. 28 that it would buy the government’s bonds temporarily to help restore market sentiment.

The Japanese yen (JPY), euro (EUR) and Swedish krona (SEK) logged double-digit declines over the period, with the Canadian dollar (CAD) and Swiss franc also posting losses. The euro is the largest component of the Dollar Index.

Even several Asian currencies remained under pressure, with PKR logging the biggest plunge at more than 26% amid dwindling reserves and expectations for rising imports. The rupee has, however, been recovering lately as Ishaq Dar arrived in Pakistan and took charge as Finance Minister. Both the Chinese yuan (CNY) and the Philippine peso  (PHP) shed nearly 14% versus USD from April 1, 2022, through Sept. 28, 2022, while the Indian rupee (INR) declined by 7.57%.

Performance of Asian Currencies

What’s Ahead?

The World Bank said in its blog focused on emerging markets that a stronger dollar creates debt worries, growth concerns and trade troubles.

“Unfortunately, countries have few options to address these problems in the short term,” the World Bank said. “These issues are best dealt with pre-emptively rather than reactively.”

For Pakistan, shoring up its foreign exchange reserves and cutting down on imports could be good points to begin with. It’s tough to stimulate economic activity at a time when momentum is fading due to devastating floods, unemployment is rising and sentiment remains fragile. Pakistan or its currency was not specifically mentioned in the World Bank article.

“Even in challenging times, policymakers can find opportunities to encourage investment and spur economic growth while reducing fiscal pressures,” the World Bank said in the August blog. “For its part, the international community must do more to speed up debt restructuring. Doing so will go a long way to put countries back on a more sustainable fiscal path.”


  • Demand scientific agricultural sect to boost process and industry restructuring and at last free education in the country to be looked urgently thanks

  • In summary, Pakistan is the worst performer against any currency.
    I like this broad comparison.


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