By Moaaz Manzoor

Pakistan’s real effective exchange rate rose to a six-month high of 106.44 in June 2026, indicating further appreciation of the rupee against the currencies of its major trading partners after adjusting for relative inflation.

According to the latest data from the State Bank of Pakistan, the Real Effective Exchange Rate index increased by 0.34% in June from 106.08 in May. The index is calculated using 2010 as the base year, with the base set at 100.

The June increase extended the REER’s upward movement for the fourth consecutive month. The index had declined from 103.99 in January to 103.11 in February before rising to 104.29 in March, 105.84 in April, 106.08 in May and 106.44 in June.

Between January and June, the REER increased by 2.45 index points. The June reading also placed the index 6.44 points above its 2010 base level.

The strongest monthly increase during the six-month period was recorded in April, when the REER rose by 1.48%. This followed an increase of 1.14% in March. The pace of increase subsequently moderated to 0.23% in May and 0.34% in June.

The Nominal Effective Exchange Rate also strengthened during the latest month. The NEER index increased by 0.64% to 38.14 in June from 37.90 in May, reaching its highest level during the January–June period.

The nominal index had stood at 37.83 in January before falling by 0.50% to 37.64 in February. It rose by 1.02% to 38.02 in March, declined by 0.35% to 37.89 in April and edged up by 0.03% to 37.90 in May.

Over the six months, the NEER increased by 0.31 index points from its January level.

The effective exchange-rate indices measure the rupee against a trade-weighted basket of currencies rather than against a single currency such as the US dollar. The NEER reflects changes in nominal exchange rates, while the REER also incorporates differences between domestic inflation and inflation in Pakistan’s trading partners.

An increase in the REER generally represents an appreciation in real effective terms. While such appreciation can reduce the domestic cost of imported goods, it may also affect the price competitiveness of exports in international markets.

The June data show that both the nominal and real effective exchange-rate indices moved upward during the month. However, the stronger rise in the REER over the first half of 2026 indicates that relative price movements, in addition to nominal currency changes, influenced Pakistan’s trade-weighted exchange-rate position.

Credit: INP-WealthPk