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Afghanistan is a war-torn country. Afghanistan doesn't have any relations with the external world.

However, it seems that the Afghan currency is stronger than the Pakistani currency:

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What should be the explanation in layman's terms?

2 Answers 2

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The absolute value of one unit of currency doesn't tell you anything about the strength of a currency. Imran Khan could decide tomorrow to revalue the rupee, and make 1 new rupee equal to 100 (old) rupees. That would make the rate 1.76 rupees to the dollar, without changing the strength of the currency at all.

Or Khan could raise interest rates, this would make the rupee stronger, but it would make loans more expensive, and a stronger rupee would make Pakistani exports more expensive. There are good reasons why you don't want a "strong" currency.

If you look over a longer time scale you'll see that there tends to be about 1.5-2 rupees to 1 afghani. Remember that the absolute values are arbitrary. The afghani gradually decreased from 2011 to 2017, then gradually increased in value relative to the rupee from 2017 to 2020. And rapidly decreased from 2020 to the present.

Part of the reason for the movement is deliberate devaluation by Pakistan, in order to make its exports more competitive.

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You need to look at relative values (not absolute ones) in a long timeframe.

Around 2022-DEC-15 there was a very brief downward spike in the value of the Afghani. It recovered from this blip to the previous value, which was rather low to start with.

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  • not clear what u want to say here.
    – user366312
    Commented Jan 16, 2022 at 6:08
  • @user366312, look at the Afghani over two months, not one. Then look at it over five years.
    – o.m.
    Commented Jan 16, 2022 at 6:16

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