The Real Effective Exchange Rate Index (REER) for the Pakistani Rupee (PKR) decreased by 1.32% in August 2024, reaching a provisional value of 100.16 compared to the revised value of 101.5 in July 2024. Despite this monthly decline, the REER has increased by 11.24% compared to August 2023, according to the State Bank of Pakistan (SBP).
NOMINAL EFFECTIVE EXCHANGE RATE (NEER) MOVEMENT
The Nominal Effective Exchange Rate Index (NEER) also saw a decrease of 1.46% in August, settling at a provisional value of 38.15 from the revised 38.72 in July. On a yearly basis, the NEER Index has risen by 3.9%.
PAKISTANI RUPEE (PKR) AGAINST USD
The Pakistani Rupee closed August at 278.54 against the USD, reflecting a slight appreciation of 0.07% compared to its value in July 2024. On a year-on-year basis, the PKR has appreciated by 9.69% compared to August 2023.
UNDERSTANDING REER AND NEER
The REER measures the price of a basket of goods in one country relative to the price of the same basket in its major trading partners. An increase in the REER indicates that exports become more expensive and imports cheaper, reflecting a potential decline in trade competitiveness. The REER index is weighted by the trading partners’ shares in trade, and a value of 100 does not signify the equilibrium value but rather the average value from a chosen base year (2010 in this case).
The NEER, on the other hand, reflects the bilateral nominal exchange rates relative to major trading partners or a selected basket of currencies, weighted by trade shares. The NEER index provides insight into the PKR’s performance against other currencies in bilateral terms.
