Small Exchange: India’s reserves pile higher, Pakistan devalues its currency and Uzbekistan trials new forex system
This week's currency news rounded up.
India stacks record high foreign exchange reserves
India's forex reserves rose $4 billion at the end of June, peaking at a record high $386.5 billion.
The Economic Times of India reports inflows had been incredibly strong throughout June, likely reflecting the buoyant gains in foreign exchange reserves.
The Reserve Bank of India is reportedly ramping up dollar reserves, given favourable market conditions.
Last month, the Reserve Bank reported a 30% hike in foreign exchange earnings from tourism, compared to the same period two years earlier.
Pakistan currency devaluation misses its target
In an effort to prop up foreign exchange reserves, Pakistan's central bank devalued its domestic currency.
Business Today reports the move, initiated last week, caused the Pakistani rupee to fall 3.1% against the US Dollar, the biggest drop in nine years.
This unexpected turn of events encouraged foreign exchange dealers to hold, rather than sell, creating a shortage of foreign currency.
While the State Bank of Pakistan is confident "this depreciation in the exchange rate will address the emerging imbalance in the external account and strengthen growth prospects", Pakistan's finance ministry hold concerns the decline was "artificial" and "negatively affected its foreign exchange markets".
Uzbekistan pilots new forex system
Uzbekistan is reportedly trialling economic reforms to help liberalise its foreign exchange system.
The Times of India reports the Uzbekistan government has permitted a limited number of banks and businesses to trade foreign currency at market rates.
Currently importers and exporters can only buy and sell domestic currency at lower fixed rates.
If successfully implemented, this new system could relieve the Central Asian nation of restrictive currency controls and potentially allow the domestic currency to become completely convertible.
Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.