Exchange rate determination of indian currency ??
The key to financial power lies in your credit rating. If you plan to get a home loan, save money and get better credit starting now!
How exchange rate of indian currency is determined. What are the practical factors that affect the exchange rate. How indian currency rate goes up and comes down (with respect to US dollar)
and what are the practical reasons behind it. How bank deals with foreign exchange and how RBI interfere in it ?
Exchange rate determination of indian currency ??Long back the exchange rate of Indian Rupee (now referred to as INR) vis a vis other currencies was an administered or controlled exchange rate. However with the opening of the economy and the Rupee being made convertible completely on current account transactions and substantially on capital account transactions the exchange rate between USD and INR is market determined.
The movements in the exchange rates between the two currencies depend on the demand and supply of that currency. When imports are being paid normally in USD, there is demand for USD and when export payments are received the supply of the USD is increased. Again forein investment inflow of USD will increase the supply while outward investments, remittance of dividends etc will increase the demand for USD.
Normally when the imports of a country are higher than its exports, there is net pressure on supply and the foreign currency tends to be stronger.
On any given day if foreing institutional investors pump in foreign money to purchase the stocks in the bullish stock markets the supply suddenly goes up and demand being constant, the rupee goes strong. In case of sudden withdrawal of investments for profit booking by the FII, the USD will become strong on account of the same reasons.
More Related Questions and Answers ...
The loan information post by website user , we not guarantee correctness.