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Why Rupee Fall and Rise

The value of a country's currency is determined by economic factors like imports, exports, inflation, growth rates, and interest rates. Higher incomes can weaken a currency if it increases demand for imported goods. A country's trade balance and flows of capital also impact its currency value. The Reserve Bank of India took steps like deregulating interest rates on NRI accounts to increase rupee inflows and strengthen the rupee's value against other currencies.

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31 views1 page

Why Rupee Fall and Rise

The value of a country's currency is determined by economic factors like imports, exports, inflation, growth rates, and interest rates. Higher incomes can weaken a currency if it increases demand for imported goods. A country's trade balance and flows of capital also impact its currency value. The Reserve Bank of India took steps like deregulating interest rates on NRI accounts to increase rupee inflows and strengthen the rupee's value against other currencies.

Uploaded by

sowndarya vangala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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One rupee in 1947 is not the same as one rupee today, both in terms of appearance and purchasing power.

The value of a country's currency is linked with its economic conditions and policies.

The value of a currency depends on factors that affect the economy such as imports and exports, inflation,
employment, interest rates, growth rate, trade deficit, performance of equity markets, foreign exchange reserves,
macroeconomic policies, foreign investment inflows, banking capital, commodity prices and geopolitical
conditions. Income levels influence currencies through consumer spending. When incomes increase, people spend
more. Higher demand for imported goods increases demand for foreign currencies and, thus, weakens the local
currency. Balance of payments, which comprises trade balance (net inflow/outflow of money) and flow of capital, also
affects the value of a country's currency. A country that sells more goods and services in overseas markets than it buys
from them has a trade surplus. This means more foreign currency comes into the country than what is paid for
imports. This strengthens the local currency," Another factor is the difference in interest rates between countries. Let
us consider the recent RBI move to deregulate interest rates on savings deposits and fixed deposits held by non-
resident Indians (NRIs). The move was part of a series of steps to stem the fall in the rupee. By allowing banks to
increase rates on NRI rupee accounts and bring them on a par with domestic term deposit rates, the RBI expects fund
inflows from NRIs, triggering a rise in demand for rupees and an increase in the value of the local currency. some
ways through which the RBI controls the movement of the rupee are changes in interest rates, relaxation or
tightening of rules for fund flows, tweaking the cash reserve ratio (the proportion of money banks have to keep with
the central bank) and selling or buying dollars in the open market,

Unit of volume for crude oil and petroleum products. One barrel equals 42 US gallons or 35 UK (imperial) gallons, or approximately 159
liters or 9,702 cubic inches (5.6 cubic feet); 6.29 barrels equal one cubic meter and (on average) 7.33 barrelsweigh one metric ton
(1000 kilograms).

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