Exchange rate and its determination

Foreign Exchange Rate or Forex rate is expressed as a comparison of two currencies and It is always relative and can be measured between two countries which is regarded as the value of one country’s currency in terms of another currency. According to the new system Liberalized Exchange Rate System the Forex rates are determined by market forces and are based on demand & supply of these currencies. The US dollar is the most predominant currency in the world. As USA is India’s biggest trading partner fluctuations in the dollar and rupee exchange rate have huge impacts on both the countries’ trade and economy. In the past few years the rupee dollar exchange rate was fluctuating frequently.

For E.g. 1$ = 60 rupee at a point of time (Assume).

Case 1: 1$ = 55 Rs. This means rupee has appreciated or become stronger and one would pay less for a dollar.

Case 2: 1$ = 65 Rs. This means rupee has depreciated or got weak and one would pay more for a dollar.

Rupee’s appreciation or depreciation against the dollar depends on the change in demand and supply for both the currencies. The demand of rupees is comparatively is high rupee appreciates if demand goes down it depreciates.

  • The Indian rupee appreciated this week by 07 paisa gain compared with the previous week close.
  • Last week Indian rupee closed at ₹69.22 with an aggregate loss of 07 paisa.
  • This week on Friday rupee closed at ₹69.15 with the loss of 0.23 paisa on Friday.
  • Highest gain 0.38 paisa on Tuesday 2019 and highest fall 0.23 paisa on Friday.

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