Mechanism of devaluation of Currency in Pakistan
The Bretton Woods agreement was created in a 1944 conference of all of the World War II Allied nations. It took place in Bretton Woods, New Hampshire.
Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar.If a country’s currency value became too weak relative to the dollar, the bank would buy up its currency in foreign exchange markets.
Members of the Bretton Woods system agreed to avoid trade wars. For example, they wouldn’t lower their currencies strictly to increase trade. But they could regulate their currencies under certain conditions. For example, they could take action if foreign direct investment began to destabilize their economies. They could also adjust their currency values to rebuild after a war.
Devaluationnward adjustment of the value of a country’s money relative to another currency, group of currencies, or currency standard.
Which is calculated by Interbank at stock exchange market bases where all day sale and purchase of different currencies take place.
Pakistan trade account deficit (which means our import are greater than exports) we have don’t enough dollar to import. So the demand of dollar increase and supply decrease. That’s the reason the devaluation of Pakistani currency.
Years Rate of dollar(Rs)
The only reason behind this our country used dollar standard (which is formed by 1944 ) that’s mean we made import and export only dollar bases but we don’t have enough dollar for all this purpose that cause the devaluation of Pakistani currency
because it’s a logical thing when demand of something increase its value also increase .