Are you one of the more than half a million Pakistani-Americans living in the United States? If so, you may be one of the many people who regularly send money home to Pakistan to help your family have a better quality of life. In fact, in 2021, $2.75 billion in remittances were sent from the U.S. to Pakistan. If you make international money transfers, it’s important to understand currency exchange rates, how international payments are made, and how the value of the U.S. dollar (USD) vs. the Pakistan rupee (PKR) could affect your money transfer home.
What is currency conversion?
Foreign currency conversion is the process of exchanging one currency to another, based on the value of one currency to the other. This is essential to factor in when transferring money in or out of the country where you reside.
What are exchange rates and how are they set?
Exchange rates show how much of one currency you can buy with another. The rate varies across currencies. Some countries exchange rates have been pegged to the U.S. dollar or the price of gold. Most of the world’s major currencies are free-floating, and exchange rates are therefore determined by market forces including interest rates, economic stability and money supply.
The Pakistani rupee is effectively a floating currency, which means that the exchange rate is not pegged to another exchange rate and can be impacted by both local and global economics. That means when you send money from the U.S. to Pakistan, the amount received can vary depending on the current market conditions.
How to calculate exchange rates
Because the exchange rate is a ratio of one currency’s value in relation to the other, calculating the exchange rate uses the following straightforward formula:
Original Currency / New Currency = Exchange Rate
Let’s work out the exchange rate for USD to PKR rate when 500 USD = 110,675 PKR.
500/110675 = 0.0045
The exchange rate can also be quoted the other way round with PKR being the original currency and USD being the new currency.
110675/500 = 221.35
When sending a money transfer to Pakistan from the U.S., you can use our currency converter for an estimate, so you don’t have to do the math yourself.
The value of the Pakistani rupee
Like the value of the dollar, the rupee’s value can drop and rise based on global and local economies, conflicts and politics. Natural disasters such as floods and earthquakes can cause significant disruption to Pakistan’s economy and cause the rupee to lose value against the dollar. If you send money transfers to Pakistan frequently, it helps to regularly monitor the PKR and USD to determine the best time to send your transfer, based on the prevailing exchange rate.
How do you make an international money transfer?
There are a few ways you can make an international money transfer. However, banks and specialist currency providers can be expensive, slow, and cumbersome. Using an online money transfer service like Western Union’s makes the process much quicker and more straightforward. You can also download the money transfer app to make payments to Pakistan. Be aware that in addition to understanding exchange rates, your transfer may also be subject to transaction fees or additional fees that may vary, depending on the mode of payment you choose.
What are the options for sending and receiving currency?
You can send money directly from your bank account, using a debit card or a credit card either via the website, the money transfer app or at an agent location. Cash can only be sent from an agent location. Your family member can pick up their cash at an agent location, or receive the money directly into their bank account.
How much money will my family receive?
The final value of your money transfer depends on the exchange rate prevailing at the time you make the transfer. You can get an estimate of how many rupees your family will receive by using the price estimator form which allows you to enter the amount you are sending and the methods of sending and receiving the currency.
For more information, check out our helpful page on sending money from the US to Pakistan.
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