all country currency compared to indian rupees

Foreign tourists visiting India would also contribute to the inflow of dollars. That explains why such flows of capital from abroad are often described as hot flows, since they can move out very rapidly. While all these forms contribute to the supply of dollars, it should be obvious that the last of them portfolio investment is a relatively uncertain source, since it necessarily implies an exit of dollars at some point.

10/24/09Ĭontd… It could also be in the form of portfolio investments where dollars are being brought in to buy assets in the stock markets, for instance, with the purpose of selling these assets when they appreciate in value to book a profit. This could be in the form of foreign direct investment where they are using the money to create some assets in India or to buy into the equity of an existing company. The third major source is investments by foreign individuals, companies or institutions in India. Another important source is Indian immigrant workers abroad who repatriate money to their kin at home. One obvious source is Indian exporters of goods and services who sell their wares in the international market for dollars. 10/24/09Ģ.Where does the supply of dollars come from? The supply of dollars comes from several sources. When the demand for dollars in India rises and supply does not rise correspondingly, each dollar will cost more rupees to buy. Thus, the dollar-rupee exchange rate will depend on how the demand-supply balance moves. Lets take the case of one foreign currency to understand how this market works. In this case, substitute currencies for goods.

The supply and demand for different goods determine what their prices are. 10/24/09Ĭontd… The process is really not different in its essentials from the way any market functions. In the case of controlled exchange rates, it is quite obvious that the government would fix them, so the question really boils down to what is the process by which markets determine rates. how are exchange rates determined ? Exchange rates between currencies can be either controlled as in the case of India prior to the reforms or left to the market to decide, as is the case now in India.

All country currency compared to indian rupees