Currency Movement

Executive nervemary TheIndian rupee(? ) is the official bullionof theRe humankind of India. The issuance of the peachy is controlled by the pass water got banking concern of India. The modern rupee is subdivided into 100 paisa(singularpaisa), although this division is now conjectural as of 30 June 2011, specie denomi earths of less than 50 paise ceased to be profound tender. Banknotes are available in nominal comforts of 5, 10, 20, 50, 100, 500 and grand piano rupees.Rupee coins are available in denominations of 1, 2, 5, 10, 100 and metre of these, thepic100 andpic1000 coins are for commemorative purposes only the only other rupee coin has a nominal take to be of 50 paisa, since firster denominations form been offici entirelyy withdrawn. TheIndian rupee symbolpic(offici entirelyy adopted in 2010) is derived from theDevanagariconsonant ? (Ra) with an added horizontal bar. The symbol erect too be derived from the Latin consonant R by removing the vertical line, and ad ding two horizontal bars ( akin the symbols for theJapanese hurtand theeuro).The first serial publication of coins with the rupee symbol was launched on 8 July 2011. The Mahatma Gandhi series of banknotes are issued by the Reserve Bank of India as legal tender. The series is so named because the obverse of each note features a portrait of Mahatma Gandhi. Since its introduction in 1996, this series has replaced all issued banknotes. The rbi introduced the series in 1996 with pic10 and pic500 banknotes. At presend, the RBI issues banknotes in denominations from pic5 to pic1,000. The printing of pic5 notes (which had stopped earlier) resumed in two hundred9.As of January 2012, the new Indian rupee sign has been incorpo roamd into banknotes in denominations of pic10, pic100, pic500 and pic1,000. INTRODUCTION The Indian Economy is the ordinal largest economy in the world with a nominal GDP of US$1,235,975 million (IMF list). The Indian merchandise has been sound in leaps & bounds. By 2008, India had establish itself as the worldssecond-fastest exploitation major(ip)(ip) economy after(prenominal) China, with a harvest- planetary house consider of 9. 4%. However, the year 2009 saw a significant retardant in Indias GDP growth send to 6. 8%.The Rupee match a record low during early 2009 on account of the international recession. However, collect to a strong national market, India managed to bounce back in the first place than the western countries. Since September 2009 there has been a constant clasp in Rupee versus roughly Tier 1 currencies. The switch tramp as on 30thOctober, 2010 ispic44. 345 to the USD. A rising rupee prompted G oernment of India to buy 200 tonnes of Gold for $6. 7 billion from IMF in 2009 as a good role reversal from 1991. Indian forex reserves patronages at$294. 01 billion (Oct, 2010). What is property?A generally accepted form of m iodiny, including coins and paper notes, which is issued by a politics and circulated wi thin an economy. Used as a medium of transfigure for goods and ser criminalitys, money is the basis for trade in. Any form of money that is in public circulation. Currency includes both hard money (coins) and soft money (paper money). typically capital refers to money that is legally designated as such by the politics body, but in some cultures currency can refer to all object that has aperceived value and can be commutingd for other objects. What is currency fluctuation?Currency fluctuations are simply the ongoing changes between the sexual likeness values of the currency issued by one earth when compared to a contrary currency. The process of currency fluctuation is something that occurs every day and impacts the relative rate of substitute between various currencies on a continual basis. autobiography BRITISH INDIAN ONE rupee NOTE In 1861, the government activity of India introduced its first paper money 10-rupee notes in 1864, 5-rupee notes in 1872, 10,000-rupee not es in 1899, 100-rupee notes in 1900, 50-rupee notes in 1905, 500-rupee notes in 1907 and 1000-rupee notes in 1909. In 1917, 1- and 21? -rupee notes were introduced. The Reserve Bank of India began banknote production in 1938, issuing 2-, 5-, 10-, 50-, 100-, 1,000- and 10,000-rupee notes while the government keep issuing 1-rupee notes. INDEPENDENT ISSUES SINCE 1949 After independence, new designs were introduced to replace the portrait of the king. The government continued issuing the 1-rupee note, while the Reserve Bank issued other denominations (including the 5,000- and 10,000-rupee notes introduced in 1949). During the 1970s, 20- and 50-rupee notes were introduced denominations higher(prenominal) than 100 rupees were demonetized in 1978.In 1987 the 500-rupee note was introduced, followed by the 1,000-rupee note in 2000. One- and two-rupee notes were discontinued in 1995. OBJECTIVE OF STUDY To get idea approximately fluctuations of Indian currency in last 10 years To cook knowl edge about the factors affecting currency fluctuations To analyze install of currency fluctuations on economy Impact of currency fluctuation on consumption, institutionalizement, exports and imports Factors poignant Currency Fluctuation pic ECONOMIC POSITION 1. intragroup Factors 2. External Factors Internal Factors includes Industrial Deficit of the agricultural. Fiscal Deficit of the verdant. GDP and GNP of the country. immaterial exchange Reserves. Inflation Rate of the Country. Agricultural growth and production. Different vitrines of policies like EXIM Policy, Credit Policy of the country as well reforms undertaken in the effectical Budget. Infrastructure of the Country External Factors includes Export trade and Import trade with the hostile country. Loan sanction by World Bank and IMF alliance with the international country. Internationally OIL Price and Gold Price. impertinent DEBT Foreign debt, in addition known as away debt, is a border used to single out the amount of money a country owes to other countries or extraneous banking organizations such as the World Bank. There are many reasons a country whitethorn choose to go into alien debt, including infrastructure increase or economic stimulation. As of 2009, the estimated conflicting debt for all world countries combine hovered at about $56. 9 trillion US Dollars (USD). One term that comes up often when considering unconnected debt is sustainability.For external debt to be sustainable, a country must take a crap a high decent tax income house servant product (GDP) in order to carry down and eventually pay off the debt while continuing its own economic function. Therefore, a country with a high GDP or large employed nation may be able to sustain much to a greater extent debt than a small or poor country. POLITICAL FACTOR In India resource held every five years mean thereby one companionship has rule for the five years. But from the 1996 India was facing politic al instability and this type of political instability has created hefty problem in the different market especially in Forex market, which is highly volatile.In fact in the year 1999 ascribable to political uncertainty in the BJP Government the rupee has depreciated by 30 paise in the month of April. So we can say that political can become important factor to determine overseas exchange in India. INFLATION RATE It is widely held that exchange judge move in the direction call for to compensate for relative inflation rates. For instance, if a currency is already over cute, i. e. stronger than what is warranted by relative inflation rates, depreciation sufficient enough to correct that position can be expect and vice versa.It is obligatory to note that an exchange rate is a relative price and wherefore the market weighs all the relative factors in relative call (in relation to the counterpart countries). The underlying reasoning behind this conviction is that a comparatively hi gh rate of inflation reduces a countrys battle and break outs its ability to sell in international markets. This situation, in turn, pass on weaken the national currency by reducing the necessitate or expected demand for it and increasing the demand or expected demand for the oreign currency (increase in the tack of domestic currency and decrease in the sum up of foreign currency). INTEREST RATE An important factor for movement in exchange rates in recent years is touch rates, i. e. relate differential between major currencies. In this respect the growing integrating of financial markets of major countries, the revolution in telecommunication facilities, the growth of work asset managing agencies, the deregulation of financial markets by major countries, he offshoot of foreign trading as profit centres per se and the tremendous image for bandwagon and squaring effects on the rates, and so forth puddle accelerated the potential for exchange rate capriciousness. BALANCE OF PAYMENTS As mentioned earlier, a net inflow of foreign currency tends to strengthen the home currency vis-a-vis other currencies. This is because the give of the foreign currency pull up stakes be in excess of demand. A good way of ascertaining this would be to check the balance of payments. If the balance of payments is validatory and foreign exchange reserves are increasing, the home currency will become strong.LAST 10 YEARS GRAPH Year Rupees 2000 45 2001 47. 23 2002 48. 62 2003 46. 2004 45. 28 2005 44. 01 2006 45. 17 2007 41. 2 2008 43. 1 2009 48. 32 2010 45. 61 2011 46. 61 Last 10 Years Fluctuation With U. S. $ Rs/$ exchange rate for last 10 years pic Major Fluctuations The major reason which draws anxiety towards this rupee appreciation has been a flood of foreign-exchange inflows, especially US dollars.The tide of capital inflows into India has taken variety of forms ranging from foreign direct investment (FDI) to remittances sent back home b y Indian expatriates. The main impact of these flows is as follows 1. FDI Indias starring economic growth has created a large domestic market that offers promising opportunities for foreign companies. Moreover many companies rising conflict in many sectors has made it an attractive export base. 2. ECB (EXTERNAL COMMERCIAL BORROWINGS) Indian companies realize borrowed enormous amounts of money overseas to finance investments and acquisitions at home and abroad.This borrowed money has returned to India, boosting capital inflows. In 2007-08 (april-september) external help (net) was placed at US $ 729 million as against US $ 386 million for the corresponding period in 2006-07 indicating a growth of 88. 9%. 3. FOREIGN PORTFOLIO INFLOWS (FIIS) Indias booming stock market embodies the confidence of the investors in the countrys incorporate sector. Foreign portfolio inflows have played a key role in fuming this boom. Looking at the period of 2003-04 and 2006-07, the net annual inflow of finances by foreign institutional investors averaged US $ 8. bn. Trends during first five months of 2007 establish that this flood is continuing with net FII inflows amounting to US $4. 6 bn. Another major source of portfolio capital inflows has been overseas equity issues of Indian companies via orbicular alluviation receipts (GDRs) & American depository receipts (ADRs). Moreover FIIs registered in India has doubled to 1050 between March 2001 march 2007 and now around 3,336 FII subaccounts also exist. . FII equity flow has increased from $9. 8 billion in 2004, $ 11 billion in 2005 to over 16 billion in 2007. these inflows have risen to 43% in 2007.However in mid-October RBI banned foreign investment via off shore derivatives called participatory notes (PN). These derivatives were used by foreign investors not registered in India (say hedge funds) to indirectly invest through registered investors. between Mar 2004 Aug 2007 the number of FII sub accounts that issued PNs rose from 14 to 34. Many believed that occasion behind such RBI measure was to improve transparency of capital inflows and that restricting inflows via PN would have little or no impact on overall inflows coming into the country. 4.INVESTMENT AND REMITTANCES Another major source of capital inflows has been non-resident Indians (NRIs) investing large amounts in special bank accounts. While NRIs frantic connection to the country of origin is part of explanation to this, the attractive avocation rate offered on such deposits also provide a sizable incentive. In 2006-07 NRI deposits amounted to US$ 3. 8 bn. another large source of foreign exchange inflows has been remittances from huge number of Indians working overseas temporarily. Such remittances amounted to a colossal of US $ 19. bn in April-December 2006, a 15% year on year increase. CHANGING SCENARIO OF 2008 The current year 2008 has started with sudden tide of depreciation of rupee. The rupee has lost its glory of invincibility that touch it over foregone one year. Between January and second week of February rupee depreciated against greenback by atleast 3%. The demand and supply theory The current year 2008 has started with sudden tide of depreciation of rupee. The rupee has lost its glory of invincibility that surrounded it over past one year. Between January and second week of February rupee depreciated gainst greenback by atleast 3%. The recent spell of depreciation of rupee is the outcome of surging demand for greenback from oil importers. Oil prices have globally happen upon anew record of $135 per barrel on 22may 2008. Since oil is prices in dollar in global market and most of our crude oil requirements being met from imports from overseas, rising prices of crude oil meant that domestic oil companies will need more dollars to fund their purchases. This triggers rupee gross revenue and dollar purchases thus leading to weakening of rupee. ADVANTAGES OF RUPEE APPRECIATION inhibit OF INFLATION Normally, currencies appreciate when the economies are doing well and the rise in their value is a cause for celebration especially for consumers. A higher value of rupee will result in cheaper imports which, in turn has a dampeningeffect on inflation. Thus, rupee appreciation helps control inflation. FOREIGN DEBT SERVICING Appreciation of the rupee helps in easing the pressure, related to foreign debt servicing (interest payments on debt raised in foreign currency), on India and Indian companies.With Indian companies taking advantage of the United States soft interest rate regime and raising foreign currency loans, known as external commercial borrowings (ECBs), this is a welcome phenomenon from the point of view of their interest commitments on the loans raised. This will help them avoid taking a bigger hit on their bottom-line, which is safe for its dispenseholders. Indian companies which have Foreign Currency redeemable Bonds (FCCBs) like Reliance Communications, Bharat Forge, Sun Pha rma and Ranbaxybenefit from the appreciation of rupee. outgoing TOURISTS/STUDENT BONANZA The appreciating rupee is a big positive for tourists travelling or wanting to travel abroad. Considering that the rupee has appreciated by over 10% against the US dollar since mid-2002, traveling to the US is now cheaper by a similar quantum in rupee terms. The same applies to students who are static in the process of finalizing their chew over plans abroad. For example, a students enrollment for a $1,000 movement abroad would now cost onlypic44,000 instead of the earlierpic49,000 organisation RESERVESConsidering that the government has been selling its stake aggressively in major public sector units in the recent past, and with a substantial globe of this being subscribed by FIIs, the latter will have to invest more dollars to pick up a stake in the political party being divested, thus aiding the governments build up of reserves. DISADVANTAGES OF RUPEE APPRECIATION EXPORTERS evilThe exporters are at a disadvantage owing to the currency appreciation as this renders their produce expensive in the international markets as compared to other competing nations whose currencies havent appreciated on a similar scale.Small exporters are hit staidly by rupee appreciation as they have limited accession to hedging products. This tends to take away a part of the advantage from Indian companies, which they enjoy due to their cost war-riddenness. However, it must be noted that in spite of the sharp currency appreciation in recent times, Indian exports have continued to grow. DOLLAR DENOMINATED EARNINGS HURT the strengthening rupee has an contrary impact on various companies/sectors, which derive a substantial hazard of their revenues from the us markets (or in dollar denominations).Software and BPO are typical examples of the sectors adversely squeeze by the appreciation of rupee. RUPEE APPRECIATION FROM THE EXPORTERS POINT OF VEIW some developing countries have eco nomies based largely on exports that are competitive in global markets because of low prices. When those countries currency gains value, they are no daylong able to offer exports to the global market at the same low prices that they planned to. This may cause importers to look elsewhere to countrys with lower valued currency and thus prices or to order less than they would have otherwise.Thus, the share of exports in economy will be affected, if the currency appreciates. The main effect on the exporters is that an appreciated currencymakes the exporters products more expensive in overseas markets and it thus erodes their international competitiveness. In the Indian scenario today, theIT industry is growing by 31% YOY and major operations (around 80-85%) are outsourced from the US-based companies. Hotels like ITC, Taj etc. have about 50% of their revenues in terms of dollars. Thus, these industries will stand to lose when rupee appreciates.Similiarly, silk industry had to bear the b runt as it was71% cranky to thehardening of the currency. Cotton and jute were less sensitive to the rising rupee at23% and 18% respectively. TheIT sector companies wereupto90% sensitive torupee appreciation. RUPEE APPRECIATION FROM THE IMPORTERS POINT OF VEIW The reverse phenomenon happens when you look at rupee appreciation from the importers point of view. Oil companies are highly benefitted, more than80% crude oil is imported from the gulf andother counties. Acc to an Indian Oil Corporation manager, for every Rs1 appreciation, crude oil price dips by2%.Another major beneficiary of rupee appreciation are theIndian companies who have gone for recent acquisitions using foreign debt-leverage. Indian companies who have International borrowings in their account are also benefitted. An appreciating rupee is beneficial for the countrys external debts as well. Consumer electronic goods, imported apparels etc become available at cheaper prices as a result of a higher valued rupee. Indust ries which import raw materials get these at acheaper price. books REVIEW 1. In the year, December 2010 Dr.Gaurav Agrawal, Aniruddh Kumar Srivastav & Ankita Srivastava had done A Study of Exchange Rates Movement and Stock Market Volatility. This research empirically examines the kinetics between the volatility of stock returns and movement of Rupee-Dollar exchange rates, in terms of the extent of interdependency and causality. 2. In the year, March 2011 RBI had done study on an empirical analysis of relation between currency rising and exchange rates volatility in India. In this paper they have find a relationship between the exchange rate volatility and the trading activity in the currency futures.Trading in currency futures in USD-INR rates was permitted at the time when the financial crisis had hit the advanced economies. fiscal POLICY UNDER FLEXIBLE EXCHANGE RATES If exchange rates are fixed, then the capital flow affects the stock of foreign exchange assets and the money su pply. If the exchange rate is allowed to vary, then the exchange rate will change in response to the capital flow. Similarly, the policy change affects the train of economic activity. A change in income results in a changed demand for imports and net exports . he change in demand for imports affects the demand for foreign exchange and also has an impact on foreign exchange market. The third party of analysis accordingly identifies the impact of the change in the interest rate in the money market on the foreign exchange market-foreign exchange reserves or the exchange rate. As the exchange rate depreciates, the competitiveness of domestic economy improves and exports increases. The increase in money supply in a floating exchange rate regime with progressive capital mobility thus resulting A depreciation of the exchange rate. An increase in income A decline in interest rate An improvement in the current account balance BIBLIOGRAPHY http//www. investopedia. com/terms/c/currency. a spixzz28ttvjLVD http//www. mbaknol. com/managerial-economics/factors-affecting-the-exchange-rate-of-indian-rupee/ http//www. marketoracle. co. uk/Article28468. hypertext markup language www. ccsenet. org/ijbm http//www. sapphireconsultinggroup. in/Rupee_appreciation. htmlExecutive http//www. investorwords. com/2186/GNP. htmlixzz2CsUdLeaQ APPENDICES BPOBPO is distinct from information applied science (IT) outsourcing, which focuses on hiring a third-party company or service provider to do IT-related activities, such as application management and application development, data promenade operations, or testing and quality assurance. BOP A record of all transactions made between one particular country and all other countries during a specified period of time. BOP compares the dollar residual of the amount of exports and imports, including all financial exports and imports. A negative balance of payments operator that more money is flowing out of the country than coming in, and vice v ersa.EXCHANGE RATE the exchange rate is the quantity of one currency required to buy or sell one unit of the other currency. fiscal DEFICIT The difference between join revenue and total disbursal of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included. FDI FDI refers more specifically to the investment of foreign assets into domestic goods and services. FOREIGN DEBT An outstanding loan that one country owes to another country or institutions within that country.Foreign debt also includes due payments to international organizations such as the International Monetary Fund (IMF). The debt may be comprised of fees for goods and services or outstanding credit due to a negative balance of trade. GNI The Gross national income (GNI) consists of the personal consumption expenditures, the gross private investment, the government consumption expenditures, the net inco me from assets abroad (net income receipts), and the gross exports of goods and services, after deducting two components the gross imports of goods and services, and the indirect business taxes.GDP Gross Domestic Product, is a primary indicator used to assess the strength of a countrys economy representing the total value of all the goods and services produced over a particular time frame. GDP = C + G + I + NX Where, C is equal to all private consumption, or consumer spending, in a nations economy G is the sum of government spending I is the sum of all the countrys businesses spending on capitalNX is the nations total net exports, work out as total exports minus total imports. (NX = Exports Imports) GNPGross National Product. GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those determined abroad), minus income of non-residents located in that country. IMF The IMF plays t hree major roles in the global monetary system. The Fund surveys and monitors economic and financial developments, lends funds to countries with balance-of-payment difficulties, and provides technical assistance and training for countries requesting it.