ifm--the basics of currency fluctuations

7/30/2019 IFM--The Basics of Currency Fluctuations

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An

Assignment

On

Reason Behind fluctuations of currency

exchange rate

Submitted to: - Submitted by:

Prof. Sushmita Sarkar SURESH CHOUDHARY(Faculty at DSBS) DSBSPGDMA 1158

Submission on:-

3 May 2013

Dayananda Sagar Business School


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CURRENCY RATE FLUCTUATION

At any given time, national currencies move relative to one another. For most

citizens of a country, this impact is usually only felt during international travel,when $10 may only be enough to buy a cup of coffee in one country but a steak at afive-star hotel in another. Investors, however, often feel the impact of currencyfluctuations far morewith commodities, equities and foreign exchange markets all

being subject to huge gains or losses based on these daily movements. What causesthese seemingly random ratio changes, and how can investors profit fromunderstanding them? Supply and demand define one currencys value in comparisonto another.

Political stability is the first key factor which impacts demand. If a country is in themidst of a civil war, then its currency will become devalued, due to a large supplywith no global demand. After all, who would want to buy currency which may

become worthless in the near future? If there is political uncertainty across theworld, then investors will exchange speculative currencies for a safe havencurrency, such as the United States dollar, which is well protected from politicalturmoil. In this case, strong demand and a limited supply will increase the value ofthe U.S. dollar in international markets.

Exchange rate

In finance, an exchange rate (also known as a foreign-exchange rate, forex rate, FXrate orAgio) between two currenciesis the rate at which one currency will beexchanged for another. It is also regarded as the value of one countrys currency in

terms of another currency.[1]For example, an interbank exchange rate of91 Japanese yen (JPY, ) to the United States dollar(US$) means that 91 will be

exchanged for each US$1 or that US$1 will be exchanged for each 91. Exchangerates are determined in the foreign exchange market,[2]which is open to a widerange of different types of buyers and sellers where currency trading is continuous:24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until22:00 GMT Friday. The spot exchange rate refers to the current exchange rate.The forward exchange rate refers to an exchange rate that is quoted and traded today

but for delivery and payment on a specific future date.
https://en.wikipedia.org/wiki/Financehttps://en.wikipedia.org/wiki/Agiohttps://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Exchange_rate#cite_note-1https://en.wikipedia.org/wiki/Exchange_rate#cite_note-1https://en.wikipedia.org/wiki/Exchange_rate#cite_note-1https://en.wikipedia.org/wiki/Japanese_yenhttps://en.wikipedia.org/wiki/United_States_dollarhttps://en.wikipedia.org/wiki/Foreign_exchange_markethttps://en.wikipedia.org/wiki/Exchange_rate#cite_note-2https://en.wikipedia.org/wiki/Exchange_rate#cite_note-2https://en.wikipedia.org/wiki/Exchange_rate#cite_note-2https://en.wikipedia.org/wiki/GMThttps://en.wikipedia.org/wiki/Forward_exchange_ratehttps://en.wikipedia.org/wiki/Forward_exchange_ratehttps://en.wikipedia.org/wiki/GMThttps://en.wikipedia.org/wiki/Exchange_rate#cite_note-2https://en.wikipedia.org/wiki/Foreign_exchange_markethttps://en.wikipedia.org/wiki/United_States_dollarhttps://en.wikipedia.org/wiki/Japanese_yenhttps://en.wikipedia.org/wiki/Exchange_rate#cite_note-1https://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Agiohttps://en.wikipedia.org/wiki/Finance


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In the retail currency exchange market, a different buying rate and selling rate willbe quoted by money dealers. Most trades are to or from the local currency. Thebuying rate is the rate at which money dealers will buy foreign currency, and theselling rate is the rate at which they will sell the currency. The quoted rates willincorporate an allowance for a dealer's margin (or profit) in trading, or else themargin may be recovered in the form of a "commission" or in some other way.Different rates may also be quoted for cash (usually notes only), a documentaryform (such as traveller's cheques) or electronically (such as a credit card purchase).The higher rate on documentary transactions is due to the additional time and costof clearing the document, while the cash is available for resale immediately. Somedealers on the other hand prefer documentary transactions because of the securityconcerns with cash.

REASON IN FLUCTUATION OF EXCHANGE RATE

Exchange rate means value of one currency in term of other. For instance 1 USD= INR. This is dollarrupee exchange rates and indicates the value of Indian rupees

per unit of dollar. But this exchange rate does not stable. Basically fluctuation iscaused by demand and supply of the currency. The demand and supply generallyaffected by countrys trade and its macroeconomic policies. The following reason isresponsible for fluctuating in exchange rate:

1. INTEREST RATE:

When interest rate in home country is higher than other country, more foreigninvestor will attract to invest in home country to make capital gain. In this casedemand for home country will increase and may be cause to appreciate.

2. MONEY SUPPLY AND INFLATION:

At the time central bank of country will print more money, the supply of moneywill increase in the market. Resulted purchasing power of customer also willincrease and resulted it will invite inflation situation. And as we know in inflationtime home countrys currency value will be weak and may be causes depreciate.


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3. BALANCE OF TRADE:

When in countrys balance of payment the export is greater than import we call

there is surplus. Normally it has seen the country which face the surplus therecurrency value increase than country which make deficit. In surplus trade countrysforeign reserve increase.

4. ECONOMIC GROWTH:

High economy and fastest growing economy country push FII from weak economyand developing countries. In this case they will sell their currency (weak economy)and buy the other currency (strong economy). In this case ifcountrys currency willface more supply and less demand value of currency will fall.

5. FOREIGN DEBT:

many developing and under developing borrowed the fund from international banklike IMF, world bank and ADB etc. but this is unplanned borrowing . At currenttime it adds in balance of payment but if we talk about future its obligation to paythe fund with interest rate. And therefore it has seen the country which has taken

more borrowed fund their value depreciates in future.

Factors of Indian rupee changes

The value of any currency in an economy is hard to bet, to be stable for a long

period of time as there are number of factor influencing its appreciation and the

depreciation. The currency value of an economy influences the growth rate of GDP

in an economy. Several other factors that have a direct influence on the over or the

undervaluation of a currency Capital flows and the stock market of India.

It's important to note that in spite of suffering recession, an economy can grow if

the capital inflow is constant or continuously rising. In India even if the GDP rate is

less, the currency can still get overvalued due to excessive capital inflows made by

the FII's in the Indian economy.


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1. US Dollar to Indian Rupee Exchange Rate Data

March 29, 2013 54.52

March 28, 2013 54.44

March 27, 2013 54.45

March 26, 2013 54.42

March 25, 2013 54.22

March 22, 2013 54.30

March 21, 2013 54.27

March 20, 2013 54.32

March 19, 2013 54.40

March 18, 2013 54.10

March 15, 2013 54.06

March 14, 2013 54.22

March 13, 2013 54.30

March 12, 2013 54.19

March 11, 2013 54.38

March 8, 2013 54.32

March 7, 2013 54.45

March 6, 2013 54.83

March 5, 2013 54.87

March 4, 2013 54.92

March 1, 2013 54.90


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2.SGD/INR Exchange rate - data:

SINGAPORE DOLLAR vs INDAIN RUPEES.

Date: Exchange rate:

2013-04-05 44.23683

2013-04-04 44.21211

2013-04-03 43.99761

2013-04-02 43.89664

2013-03-28 43.7522

2013-03-27 43.76951

2013-03-26 43.84143

2013-03-25 43.60394

2013-03-22 43.49447

2013-03-21 43.41061

2013-03-20 43.42325

2013-03-19 43.50269

2013-03-18 43.31126

2013-03-15 43.26619

2013-03-14 43.43482

2013-03-13 43.51006

2013-03-12 43.4823

2013-03-11 43.54767

2013-03-08 43.62138

2013-03-07 43.78027

2013-03-06 43.93622

2013-03-05 44.02302


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3.GBP/INR Exchange rate data: BRITISH POUND.

Date: Exchange rate:

2013-04-05 83.59204

2013-04-04 83.03499

2013-04-03 82.33734

2013-04-02 82.13839

2013-03-28 82.26821

2013-03-27 82.28244

2013-03-26 82.45701

2013-03-25 82.36414

2013-03-22 82.50586

2013-03-21 82.22862

2013-03-20 82.26146

2013-03-19 82.23754

2013-03-18 81.7309

2013-03-15 81.79514

2013-03-14 81.24524

2013-03-13 81.23416

2013-03-12 80.72236

2013-03-11 80.95723

2013-03-08 81.71871

2013-03-07 82.13988

2013-03-06 82.56594

2013-03-05 83.17167


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4. EUR to INR (Euro to Indian Rupee) Exchange

Rates:

Date Last Open High Low Change %

Apr 04, 2013 70.954 69.968 71.074 69.788 1.44%

Apr 03, 2013 69.944 69.779 70.085 69.492 0.25%

Apr 02, 2013 69.771 69.781 69.966 69.609 -0.02%

Apr 01, 2013 69.781 69.569 69.817 69.569 0.31%

Mar 31, 2013 69.569 69.569 69.569 69.569 0.00%

Mar 29, 2013 69.569 69.569 69.569 69.569 0.00%

Mar 28, 2013 69.569 69.487 69.726 69.305 0.12%

Mar 27, 2013 69.487 69.917 69.986 69.225 -0.62%

Mar 26, 2013 69.917 69.664 70.155 69.600 0.36%

Mar 25, 2013 69.664 70.587 70.805 69.601 -1.31%

Mar 24, 2013 70.587 70.587 70.587 70.587 0.00%

Mar 22, 2013 70.587 70.047 70.682 70.026 0.77%

Mar 21, 2013 70.047 70.309 70.446 69.904 -0.37%

Mar 20, 2013 70.309 69.951 70.515 69.924 0.51%

Mar 19, 2013 69.951 70.004 70.513 69.835 -0.08%

Mar 18, 2013 70.004 70.638 70.638 69.701 -0.90%

Mar 17, 2013 70.638 70.638 70.638 70.638 -0.02%Mar 15, 2013 70.652 70.736 70.927 70.379 -0.11%

Mar 14, 2013 70.731 70.455 70.763 70.126 0.39%

Mar 13, 2013 70.455 70.543 70.796 70.064 -0.12%

Mar 12, 2013 70.543 70.916 70.927 70.453 -0.52%

Mar 11, 2013 70.911 70.688 70.987 70.499 0.32%

Mar 10, 2013 70.688 70.688 70.688 70.688 0.03%

Mar 08, 2013 70.669 71.527 71.549 70.448 -1.21%

Mar 07, 2013 71.537 71.016 71.565 70.892 0.73%

Mar 06, 2013 71.016 71.666 71.666 70.953 -0.91%

Mar 05, 2013 71.666 71.508 71.722 71.188 0.22%

Mar 04, 2013 71.508 71.558 71.767 71.236 0.00%

Highest: 71.767 Lowest: 69.225 Difference: 2.542 verage: 70.383 Change %: -0.7


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5. JPY to INR (Japanese Yen to Indian Rupee) Exchange

Rates:

Date Last Open High Low Change %

Apr 04, 2013 0.5691 0.5860 0.5884 0.5665 -2.90%

Apr 03, 2013 0.5861 0.5826 0.5881 0.5797 0.53%

Apr 02, 2013 0.5830 0.5824 0.5865 0.5813 0.10%

Apr 01, 2013 0.5824 0.5762 0.5824 0.5762 1.08%

Mar 31, 2013 0.5762 0.5762 0.5762 0.5762 0.03%

Mar 29, 2013 0.5760 0.5760 0.5760 0.5760 0.00%

Mar 28, 2013 0.5760 0.5766 0.5790 0.5751 -0.10%

Mar 27, 2013 0.5766 0.5746 0.5777 0.5720 0.35%

Mar 26, 2013 0.5746 0.5764 0.5785 0.5736 -0.31%

Mar 25, 2013 0.5764 0.5750 0.5795 0.5700 0.24%

Mar 24, 2013 0.5750 0.5750 0.5750 0.5750 0.00%

Mar 22, 2013 0.5750 0.5719 0.5774 0.5714 0.52%

Mar 21, 2013 0.5720 0.5661 0.5758 0.5650 1.04%

Mar 20, 2013 0.5661 0.5720 0.5742 0.5652 -1.03%

Mar 19, 2013 0.5720 0.5671 0.5749 0.5639 0.86%

Mar 18, 2013 0.5671 0.5670 0.5756 0.5657 0.02%

Mar 17, 2013 0.5670 0.5670 0.5670 0.5670 -0.02%

Mar 15, 2013 0.5671 0.5666 0.5686 0.5615 0.12%

Mar 14, 2013 0.5664 0.5661 0.5679 0.5616 0.05%

Mar 13, 2013 0.5661 0.5650 0.5681 0.5632 0.19%

Mar 12, 2013 0.5650 0.5631 0.5686 0.5614 0.34%

Mar 11, 2013 0.5631 0.5661 0.5672 0.5627 -0.53%

Mar 10, 2013 0.5661 0.5661 0.5661 0.5661 0.04%

Mar 08, 2013 0.5659 0.5750 0.5750 0.5638 -1.55%

Mar 07, 2013 0.5748 0.5826 0.5849 0.5733 -1.34%

Mar 06, 2013 0.5826 0.5887 0.5890 0.5816 -1.04%

Mar 05, 2013 0.5887 0.5873 0.5899 0.5863 0.24%

Mar 04, 2013 0.5873 0.5868 0.5909 0.5857 0.00%

Highest: 0.5909 Lowest: 0.5614 Difference: 0.0295 Average: 0.5737 Change %: -3.10


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ifm--the basics of currency fluctuations

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