By:- CA Abhinav Jain

Value of one country’s currency in terms of other currency.

e.g.

1$ = 63.71 INR

It may fluctuate daily.

A country with a lower inflation rate than another's will see an appreciation in the value of its currency.

higher inflation typically sees depreciation and is usually accompanied by higher interest rates

Increases in interest rates cause a country's currency to appreciate

Higher interest rates provide higher rates to lenders, Attracting more foreign capital, which causes a rise in exchange rates

Forex rates, interest rates, and inflation are all correlated.

Balance of trade and earnings on foreign investment.

Total number of transactions including its exports, imports, debt, etc.

Spending more on importing products than it sale of exports causes depreciation.

Public debt or national debt owned by the central government.

A country with government debt is less likely to acquire foreign capital, leading to inflation.

Foreign investors will sell their bonds in the open market

As a result, a decrease in the value of its exchange rate will follow.

Recession

Political stability

Terms of trade

Weighted average of Time series model, Regression mode, sensitivity analysis, spot rates, forward rates.

Demand & SupplyDemand of the currency increase – Appreciate currency

& vice versa

FIIs Demand increase.

Greece Insolvency Uncertainty in market

Make in India Demand increases

Gold, Crude oil (investment)

CA Abhinav Jain