Intervention by the RBI in the foreign exchange market by way of purchase of dollars that increases forex reserves and reserve money, if not sterilised, can push down money market interest rates below the policy rate and lead to inflation.
What factors affect the exchange rate of foreign exchange?
- exchange rate the domestic country exports will bring the high foreign exchange for the country and vice versa. When some countries currency increases or decreases, it brings the changes in the whole
What is the effect of depreciation in exchange rate?
- Depreciation in exchange rate increases the domestic currency value and decreases the value of our own currency as well. If our own country currency rate increases due to foreign exchange rate declines then the domestic country can import the goods at cheap prices.
Is the exchange rate policy in India supportive of external sector target?
- The results of the study indicate that the exchange rate policy in India has been actively supportive of the external sector target in terms of a sustainable level of current account deficit. Section V Conclusion
Is the exchange rate regime in India highly managed?
- While the exchange rate regime in India can be characterised as highly managed, this needs to be viewed against the transitional phase in the evolution of the regime and the development of the markets. Simplicity in the computation of the indicators proposed in this paper recommends their use for operational purposes.