greywolf
Councller (250+ posts)
Actually I am not disagreeing with you ... you surely overlooked the thing I mentioned. Those who deal in foriegn exchange should not have been affected if it was the only reason that you provided ... pegging PKR against USD. In reality that is not the case ... I agree that there was this pegging in some cases ... and only selected few cases with its own reasons ... but this is not the only and sole reason.
I deal in foriegn exchange and I know that any currency presented in international market for trading can't be pegged in all weather against a single currency. Take China for instance ... since Chinese Yuan is not an international currency and does not have buying power internationally ... China was forced to collect dollars for her international purchasing transactions. And they kept collecting until there was no more room to stash them. And when currency was getting out of hand, US was facing higher rate of inflation ... and China had more legal tender than actually circulating within USA ... they persuaded China to buy USD securities until there were no more securities left ... then China moved on to commodities like gold. Recently there is no more gold and China is straight heading for the source ... buying goldmines directly instead of buying gold from open markets.
Exactly along the same lines Pakistan rupee was not recognized internationally before mid eighties ... so Pakistan had to keep USD rates stable and if there was some volatility it was because of dollar reservoirs in Pakistan and no international market affected it. Then after Zia's certain death ... with democratic powers coming into rule ... they introduced PKR in international markets and presented it for trading in open exchanges. It was then that they started their bleak hazardous game regarding PKR. Whenever there was some aid money coming or IMF installament ... government would raise USD prices in Pakistan in clear contrast to international market where USD was actually falling down ... just in order to scrape the dividend from within their own country. It was only then that PKR was pegged to USD because it saved the short-cut I mentioned above ... that any keen exchanger would have bought GBP and liquidated it into USD to get lower rates ... this was stopped by pegging PKR to USD ... Hope you now understand.
As in a very recent example ... USD has been gaining strength against European currencies ... until Euro saw its 4 year minimum ... Sterling went berserk against USD ... but USD rates never moved in Pakistan. On the contrary it had an altogether opposite affect on our stock markets. And today, Friday June 11th, 2010 ... Euro gained almost 200 points against USD ... but you will not see any change in USD rates ... if PKR was pegged to USD ... we would have reached 50 rupees against GBP. Pegging does happen but not always.
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