Forex Market

FY04 was an eventful year for the foreign exchange market in Pakistan. Not only
did it witness the end to the steady appreciation of the Rupee since mid-FY02, the
pressure on the local currency was caused by both a sharp squeeze in the current
account surplus as well as a dip in the differential between Rupee and US$ interest
rates. In fact, the increased sensitivity to interest rates has been a hallmark of the
exchange rate market in both FY03 and FY04.

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