The Pakistani rupee’s exchange rate against the dollar, the global reserve currency against which practically all other currencies are calculated, has been the topic of much debate, especially since the new government came to power and opted for a free-float. The opposition, especially, has been transfixed by all the gyrations, particularly in the earlier part of the last two years. That is because they refused to let the rupee below the 100 to the dollar mark, no matter what. It’s another thing altogether, of course, that the PML-N approach did not do the economy much good; even though it’s also true that a good 40 percent squeeze of the rupee since then also failed to stimulate exports much. All that aside, it is important to note that most local commentators, and also so-called experts, often get everything that goes into calculating our exchange rate pretty wrong. After all, it’s not as if the greenback only trades against the rupee, so we can cite only local reasons for daily shifts in value. The fact of the matter is that the dollar, which is the quintessential safe haven trade – that is people are encouraged to buy it in times of distress – rose sharply in the early days of the pandemic, which is when countries like Pakistan began sweating about their exchange rates once again. However, since then central banks of all major, and also most minor, economies have flushed their systems with enough liquidity for investors to trigger an epic bull run. In clear defiance with all sorts of fundamentals, the world most important stock markets have continued to rise and set records over the last few months, despite the steep global recession that has already been caused by Covid-19. That made the dollar’s appeal diminish in the eyes of many major investors, and representatives of financial outlets in third world countries just said that their own respective currencies rose against the dollar, while the greenback actually fell across the board because of widespread abandonment of the safe haven trade. Late last week though the world’s stock markets tumbled, even though ours didn’t, and punters once again sought the safety of the dollar. That is why it has been rising once again, leaving currencies like the rupee to lick their wounds. Our bunch of experts might have noticed that values of currencies that are pegged to the dollar, like the UAE dirham and Saudi riyal, which do not trade freely also oscillate with every change in the dollar. It is, therefore, more about the dollar’s characteristics than the rupee’s, and our decision-makers need to take such facts into account. *