Will Rupee Devalue Further? Economic roller coaster

[VCheng]

So if the total depreciation is 4500% over 73 years, how much is that per year? Or if the loss of value is 98% over the same time period, how much is that per year?

[khurem]

5.33%. You see, USD to PKR is a ratio and basic maths should tell that you can't compute average percentage change from a linear average. In ratios, a change from 3 to 6 is not equal to a change from 60 to 63. It's a percentage change that is applied each year. You have to use geometric mean.

Mathematically, you can google the geometric mean to see this yourself. Formula is this ((4500%)^(1/n)-1). You will get the same result.

P.S: n=74 (or 73)

[VCheng]

Ah, that makes more sense to me, thanks.

[VCheng]

All this is against Pakistani fundamentals though.

We all should feel better now. Given the several previous posts above, we can rejoice that the average depreciation per year is only 5.33%, and not 10%. YAY!

[Xulfiqar]

thats like saying

The Kodiak is not going to attack, but the Bobcats will. - Bobcats are smaller than Kodiaks.

[HellsGuardian]

5% or 10%, please share some light if it is the right time to invest and where to invest? There is no point keep hard cash in PKR sitting in your bank account losing value.

[Xulfiqar]

USD against PKR always wins. Gold too. You can fancy some crypto if you like as well.

[khurem]

Well, just to give you some perspective how misplaced your sarcasm is, had there been an average 10% depreciation in USD to PKR every year since 1947, current rate of USD to PKR in 2021 would have been Rs 3,800 to 1 USD. To reiterate, it's not Rs. 380, but Rs. 3,8000! We would have been worse than Venezuela or Somalia.

Still think 5.33% and 10% is similar?

[VCheng]

What sarcasm? 3,800 is total collapse territory, and it has not happened - yet. Nothing to worry about! Mein bilkul nahi ghabraa raha. Nope.

[khurem]

Ghabrana tou chahiyeh as even 5% depreciation every year is way too much. We can already see the consequences.

My point certainly wasn't that we are facing good times ahead, in fact quite the opposite, as the country is going southwards from every perspective and to me the future is bleak. Being a numbers person however, it was just the % depreciation which I differed with in your initial post as just a 1% change over longer terms makes a hell lot of difference. In all other respects, I agree with you.

[mgalaxy3]

Very insightful posts. Thx

Foolishly, I kept some pkr, which are now much depreciated.
Any ideas how to make up that loss, where to invest to keep them safe or recover.

[khurem]

Our currency has depreciated so much that we now see conversion into foreign currency as an investment avenue. However on a longer term, investment in bond / T-Bills or fixed income market has outperformed FX in terms of % return. So that's one option which is also risk free however the rate of return has gone down due to reduction in SBP discount rate to 7%. Personally, I like equities as it easily outperforms both over long term. You may invest in high dividend yield stocks (giving > 10% dividends) that are less risky or may diversify with some growth or value stocks.

[uzeemujeeb]

Any ideas how to make up that loss

if you buy NIT Units before April 15th ( before book closures) You can earn a dividend for 1 year at June 30. At present NIT is best safest Rupee Investment.

[mgalaxy3]

You may invest in high dividend yield stocks (giving > 10% dividends) that are less risky or may diversify with some growth or value stocks.

what are the good options, can you mention any specific? T

[mgalaxy3]

if you buy NIT Units before April 15th ( before book closures) You can earn a dividend for 1 year at June 30. At present NIT is best safest Rupee Investment

Is it a mutual fund? Can you give some details as I don't understand this dividends thing much

[uzeemujeeb]

you can please check NIT website or visit any NIT office in your city with your cheque book. They don't deal in cash, purchase can be blocked against cheque at spot rate. ( www.nit.com.pk )
return is variable income tax deduction can be adjusted in annual tax returns

[HellsGuardian]

Is profit interest based?

[uzeemujeeb]

sir the profit is variable based on industrial agricultural trade and economic situation in the country. not fixed as banks offer fixed which is haram in certain faiths. However the invested value never dropped below 0.5% of invested value in past 20 years, where as annual return spiked over and above 13 to 15% during Musharraf era. My fraternity retired senior citizens heavily invest in NIT units and monitor regularly.

[HellsGuardian]

any reliable place in Lahore to buy gold from? The point of buying is to safeguard savings that are in hard cash.

[syeddanishanwar]

I had bought dollars about two years ago at Rs. 160 per dollar rate. People were predicting that the rupee would go up to Rs. 200 at that time. At the moment, it has appreciated to the surprise of most to Rs. 150.

Do you think Rupees will revert back to its normal trajectory? If yes, when should we expect the rupees to depreciate beyond Rs. 170? Election time??