Reasons for rupee appreciation against dollar??

Question

suppose some time ago 1$=48 rupees n now its 1$=40 rupees...now we call this as rupee appreciation right..here is my question...what are the reasons for such appreciation?reasons explained in detail..

Answer 1

The value of one currency in terms of another will depend on the value of trade between the two countries.  If the value of exports from India to USA in Rupees exceeds sales from USA to India in Dollars, then traders on the whole will be selling Dollars and trying to buy Rupees.   The exchange value of the Rupee will rise and of the Dollar will fall.

In the simplest case, if only these two countries were trading, then a 10 per cent imbalance of trade in favour of India will lead to a 10 per cent rise in the value of the Rupee.

However, the simplest case is not realistic because traders use all convertible currencies and often go through an intermediary currency such as Swiss Francs, Yen or Euro.  Even so, the pressure on one currency will be to raise its value and to depress the other.

In the case of the Rupee, a complication arises because it is not convertible on the international exchange.  For some reason, the Indian Government has decided that the Rupee shall not be traded out of the country.  There are strict controls on the number of Rupee that anyone can take with them out of India.  So all Indian international trade is conducted via intermediary convertible currencies and the US Dollar is one of them.  In that case, the pressure on the US Dollar from Indian exports is direct and immediate.  That's why the Rupee-Dollar rate is a very good measure of the Indian balance of payments surplus with USA.

Basically, the Americans are buying more goods and services from India than Indians are buying from America.

Answer 2

Its another sign of the agony of Capitalism, US dollar is plummeting.

Answer 3

illegal immigrants...

Answer 4

Because Bush wanks in the White House.

Answer 5

First , It is complicated ok. I will try to explain few reasons.

In an ideal world, Value of currency is determined by its demand. if USD is more in demand the it will be pricey and vice versa.

Since last few years, India's export (and hence forex reserve) is expanding rapidly in other word, there is more supply of USD in indian forex scene. obviously, value of USD will go down.

Now the twist, INR and USD are not the only currency in the world. As soon as the corresponding value of 2 currencies start to change based on pure market conditions (explained above) arbitrage seekers come into the picture. ppl might convert GBP to INR  and purchase USD to make a profit based on currency rate differences. Fortunately world forex market is mature and absorbs any effect on single currency. So if INR is getting stronger, it shall impact multiple currencies based on multiple demand supply equations.

Anyways, another major factor is Govt and fed bank policies. RBI of India can control prices of USD/INR. How? by sucking USDs from market, it can appreciate USD and depreciate INR. It just have to print more INR and purchase USD. The negative side effect is inflation and positive is job creation (With costly usd, exports will benefit and hence more productivity/job/consumption).. the cycle continues...

Finally govt policies, Some countries are import oriented (US) and some are export oriented (India, Japan). For export oriented countries, it makes more sense for a weaker currency to promote development and consumptions.

Then there are other factors like wars, oil prices, credit crunch ....which also impacts....

In last few years, INR is getting stronger because of increased trade. Infact RBI is holding USD to avoid hitting exporters otherwise, there are indications that INR can go upto 34-35 range in few months if left freely. and beyond...

Answer 6

Basically, in countries where the US or canadian dollar can be exchanged for so much money is because North America is richer than those countries. Such as places with the rupee, or pesos even. They've got more money, so money loses it's value based on how much there is. A drink may cost 80 rupees, but it'll still only cost 2$ in america or canada.