The document discusses India's foreign exchange market and the rupee exchange rate. It provides background on exchange rates, defines currency appreciation and depreciation, and outlines the key players in India's foreign exchange market like commercial banks and central banks. It also examines the factors that influence exchange rates, like inflation differentials and interest rates. The document notes that while currency depreciation hurts importers, it can benefit exporters. Finally, it shares recent exchange rates between the rupee and dollar, pound, euro and yen over a five day period.

1. INDIAN FOREIGN EXCHANGE
MARKET &
RUPEE EXCHANGE RATE

2. CONTENTS
SR. NO. PARTICULARS
1 Introduction
2 InstrumentsOf Foreign Exchange Market
3 Foreign Exchange Rate & Fluctuations in ExchangeRate
4 Types ofExchange Rates
5 Determinants ofExchange Rates
6 Appreciation & Depreciation ofIndian Rupee
7 RupeeExchangeRate

3. Introduction
Price of a home currency with respect to
foreign country’s currency is known as
Exchange Rate.
Currency Appreciation – An increase in the
value of domestic currency with respect to
the foreign currency.
Currency Depreciation - Loss in value of the
domestic country's currency with respect to
the foreign currency.

4. Forex markets functions as anchors of trading between different types of buyers & sellers
around the world.
The gradual liberalization of Indian economy has resulted in a substantial inflow of foreign
currency capital into India.
Dismantling of trade barriers has also facilitated the integration of domestic economy with
the world economy.
The Foreign Exchange Market comprises:
Corporate
Commercial Banks (e.g. SBI, Kotak, ICICI etc.)
Exchange Brokers (e.g. FX Pro, Nord FX etc.)
Central Banks (e.g. Reserve Bank of India)
Introduction

5. ISSUES OF INCREASE IN EXCHANGE RATE
COSTLY
IMPORTS
HIGHER
INFLATION
DEPRECIATION
OF LOCAL
CURRENCY
INCREASE IN
EXTERNAL
DEBT

6. EFFECTOF INCREASEIN EXCHANGERATE
• Only exporters
will be happy like
IT companies
• Importers will feel
the heat
Importers &
exporters
• CAD will grow
more which in
turn force the
Indian govt. To go
for international
borrowing
Country’sfiscal
health
• 3rd highest
importer of crude
oil increase in fuel
prices
Fuel price
• Expenses for the
college fees as well
as living will shoot
up
Students studying
abroad
• The depreciating
rupee price will
hamper the people
planning their
holiday abroad.
Tourism

7. How TOCURBTHE ISSUE
• Using FOREX reserves
• Raising interest rates
• Make investments attractiveMEASURESBY RBI
• Government should take some
efforts to bring FDI and create a
healthy environment for economic
growth.
MEASURESBY
GOVERNMENT

8. Instrumentsfor foreign exchange
market
Foreign ExchangeForwards
Currency Future
CurrencySwaps
CurrencyOptions

9. Foreign exchange rates
Foreign Exchange Rate - The rate at
which one currency will be
exchanged for another. It is also
regarded as the value of one
country’s currency in terms of
another currency.
E.g. US$1 = ₹62/-

10. Fluctuations in exchange rates
• A market-based exchange rate will change whenever the
values of either of the two component currencies
change. A currency will tend to become more valuable
whenever demand for it is greater than the available
supply.
• Increased demand for a currency can be due to either an
increased transaction demand for money or an increased
speculative demand for money. The transaction demand
is highly correlated to a country's level of business
activity, gross domestic product (GDP), and
employment levels.

11. Types of exchange rates
• FLOAT EXCHANGE RATE
• PEGGED FLOAT EXCHANGE RATE
• FIXED EXCHANGE RATE

12. Free float regime
Managed float regime
Pegged Regime
Fixed Regime

13. Determinants of exchange rates
• Differentials in Inflation
• Differentials in Interest Rates
• Current - Account Deficits
• Public Debt
• Terms of Trade
• Political Stability & Economic Performance

14. Appreciation & depreciation on Indian
Rupee
• An increase in the value of
domestic currency with respect
to the foreign currency.
CURRENCY
APPRECIATION
• Loss in value of the domestic
country's currency with respect
to the foreign currency.
CURRENCY
DEPRECIATION

15. Reasons for depreciation of rupee
• Current account deficit
• Inflation
• Political paralysis
• Recession in Euro zone
• Negative remarks of credit agencies

16. Effects of Depreciation in Rupee inIndia
• Value of imported items will increase.
• The current account deficit will increase.
• Depletion in Forex reserves.
• The borrowing cost for the companies will increase.
• Deprecation in rupee is good for companies which
are billing to its customers in dollars.
• It is good for employees who are abroad and getting
salary in dollars.

17. Measures to Control Fallin Rupee
1. Allowing sovereign wealth funds, endowment
funds and foreign central banks to invest in
government bonds.
2. Raising the foreign investment cap.
3. Boost the slowing industrial growth.
4. More exports incentives and reduce imports.
5. Limit the foreign currency expenditure.

18. Rupee exchange rate
The rupee exchange rate is the
rate at which rupees are
exchanged for foreign currencies.

19. The following is the last 5 days value of
Dollar-Rupee Rate (1US$= ₹?):
27th Dec 2013 (Fri): ₹61.98
30th Dec 2013 (Mon): ₹61.89
31st Dec 2013 (Tue): ₹61.90
2nd Jan 2014 (Thu): ₹62.26
3rd Jan 2014 (Fri): ₹62.19

20. Pound-Rupee Rate (1£= ₹?):
27th Dec 2013 (Fri): ₹102.03
30th Dec 2013 (Mon): ₹102.16
31st Dec 2013 (Tue): ₹102.00
2nd Jan 2014 (Thu): ₹102.74
3rd Jan 2014 (Fri): ₹102.53
The following is the last 5 days value of

21. Euro-Rupee Rate (1€= ₹?):
27th Dec 2013 (Fri): ₹85.27
30th Dec 2013 (Mon): ₹85.18
31st Dec 2013 (Tue): ₹85.36
2nd Jan 2014 (Thu): ₹85.15
3rd Jan 2014 (Fri): ₹85.19
The following is the last 5 days value of

22. Yen-Rupee Rate (1¥= ₹?):
27th Dec 2013 (Fri): ₹0.59
30th Dec 2013 (Mon): ₹0.588
31st Dec 2013 (Tue): ₹0.587
2nd Jan 2014 (Thu): ₹0.587
3rd Jan 2014 (Fri): ₹0.599
The following is the last 5 days value of

25. Conclusion
The Rupee decline affects everyone in the
economy because it feeds directly and
indirectly into general inflation which affects
the common people.
More exports incentives and reduced imports
would beneficial for appreciation in Rupee.

26. PRESENTED BY:
• Ishan Khanna-13034
• KarenD’souza-13037
• Kirk Coutinho-13040
• Mausumi Sen-13042
• NikitaBhinde-13046