USD appreciation in 2010 invokes the biggest risk in "Currency Carry Trade" that tumbles the UBS V24 Carry Index 2.5%, the most in 2010, since the inception of index in 1999.
UBS V24 Carry Index includes 24 currencies, including G-10, Emerging Europe, Asia, South America and Africa
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| Source: UBS |
Pakistan’s external debt is largely (more than 90 %) denominated in four currencies, i.e., US$, Euro, Yen and Special Drawing Rights (SDRs). However, the debt is reported in US dollar in Pakistan.
ReplyDeleteThus a movement in US dollar vis-a-vis other currencies in which the debt is denominated has its effects on changes in debt stock.
Unlike FY09 when depreciation of US dollar against major currencies contributed to increase in the EDL, in FY10 the effect was opposite as the valuation losses were more than offset by valuation gains. As a result, there was a net decline in EDL of 302.7 million during FY10 [SBP]