Indian rupee and Pakistani rupee are two known currencies in financial markets. The economies of the countries are part of the news every now and then. The Indian market is in news for various reasons, some relating to its development while other discussing the loopholes of the economy. 

Whereas Pakistan has been in news for its economic failures lately. The country is facing an economic crisis pertaining to its bad governance. To get a detailed idea of the factors that affect the INR to PKR exchange rate for successful forex trading let's dig in. 

INR to PKR Exchange Rate

The current exchange rate of INR to PKR is 3.48. The price of currency pairs is fluctuating due to market changes. 

Pakistan's rupee initially after independence was pegged to the British pound. But later in 1982 the government of Pakistan adopted managed floating policy. Under the policy the nation's central bank routinely intervened to ensure the currency remained under a certain price range.  

The Indian currency was also pegged to the British pound after independence. They later adopted monetary policy for free flow of its currency and maintaining its value. The Reserve Bank of India looks into INR publishing and its value in the market. 

One can trade in the currency pair through the forex market. However, they have to understand the market of the two economies to benefit from the trade. 

Factors Affecting INR To PKR

Forex market is affected by various factors. These could be related to flow of money, demand and supply, trade balance, economic policies or other. One has to ensure that they analyse the market well before trading to have successful trade. 

Here we have discussed the factors which affect the exchange rate of INR to PKR in financial markets. The real and monetary factors which we find affect the currency pair are: 

Inflation Rate

Inflation is a significant factor of the financial market. Change in inflation in the market brings changes in the exchange rate of the currencies. The inflation rate of Pakistan is highest in South Asia (35.4%). 

India's inflation rate is 5.66%. This shows the big difference in the inflation rate of the two economies. This affects the exchange rate of the currency pair. As one country has lower inflation than the others the price of goods and services also differ. 

With low inflation the price of goods and services is low. But with high it has higher rates. 

Bank Interest Rates

Interest rate is another essential factor that affects the exchange rate. If there are changes in the bank interest rate of a country it will affect the currency value. The three terms of monetary policy are related to forex rate, interest rate and inflation rate. 

So, if the interest rate is high the currency appreciates. It is so because high interest gives lenders a chance to get high interest to attract foreign capital thus increasing the exchange rate. 

Government Debt 

Government debt or public debt is the debt that is owned by the government of the country. A country should have low national debt for maintaining their economy. It is a significant factor that impacts the exchange rate of INR to PKR. 

A country that has government debt will not acquire foreign capital. This leads to inflation. The traders or foreign investors will sell their bonds in the market thus decreasing the exchange rate of the country. 

Pakistan has high government debt which lowers its exchange rate in comparison to India. 

Terms of Trade 

Low trade is a factor that could impact a country's exchange rate. The current accounts or balance of payments and terms of the trade are the ratios that are an important part of the financial market of a country. 

The import and export prices of goods and services need to be friendly with other countries and ensure stability of the country's for earning. As the terms improve the export of the country which improves the exchange rate. However, imports should be low. 

So, INR To PKR is affected by the terms of trade of the countries. 

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Political Stability 

Economic performance and political stability affects the exchange rate of a country. If a country has less political risk it has chances of attracting more foreign investors. This also improves their chances of financial stability and improves the trade in the country. 

But if the country has a poor political situation and economic performance the exchange rate automatically deteriorates. Pakistan's economic and political stability is low which lowers their exchange rate in comparison to India.  

Conclusion

The article talks about factors that affect the INR to PKR exchange rate. Readers can analyse the two currencies and how they have two different financial markets which lead them to have different currency values. 

The Indian market is more stable and developing in comparison to Pakistan's. The exchange rate of INR to PKR is 3.48 and it keeps fluctuating due to various reasons. Recently, Imran Khan ( Ex-PM of Pakistan) was arrested and this has lowered the exchange rate of the country's currency. 

So, politics, inflation, economic stability, bank interest rate , government debt and terms of trade all affect the exchange rate of currencies in financial markets.