INDIAN RUPEE VS U.S.

DOLLAR

Introduction:Investors in all over world not only impacts the share market but the whole economic
conditions of the country and it is observed that most investors started to believe that value Indian rupee will not be the same in world market as it is now. This is because of the fact that its value in comparison to the widely used currency in world dollar is decreasing consistently and therefore it is very important for the India to know and rectify the problems which causes it. This drop of value of rupee is from very long time (after independence of India) and so problems are seems to be chronic. People of India must

be aware of this problem in order to minimize the problem. This subject of this project is
one of the efforts to generate a detailed report about this problem.

India is the place where the concept of coinage developed at its earliest in around 6th century BC which later on built the base for other currencies of the world. According to the historians, the Indian currency i.e. rupee was brought into existence by Sher Shah Suri in the 16th century and it was evaluated as equal to 40 copper coins per rupee. The paper money was introduced under their reign in the latter part of the 18th century. Bank of Hindustan made the earliest rupee notes issues in the year 1770.

United State Dollar

The history of the dollar in North America pre-dates US independence. It began with the

issuance of Early American currency called the colonial script, whereby the issuance of
currency was equal to the goods and services in the economy. Even before the Declaration of Independence, the Continental Congress had authorized the issuance of dollar denominated coins and currency, since the term 'dollar' was in common usage referring to Spanish.

colonial eight-real coin or Spanish dollar. Though several monetary systems were proposed
for the early republic, the dollar was approved by Congress in a largely symbolic resolution on August 8, 1786. After passage of the Constitution was secured, the government turned its attention to monetary issues again in the early 1790s under the leadership of Alexander Hamilton, the secretary of the treasury at the time. Congress acted on Hamilton's recommendations in the Coinage Act of 1792, which established the dollar as the basic unit of account for the United States. The word "dollar" is derived from Low Saxon "thaler", an

abbreviation of "Joachimsthaler" (coin) from Joachimsthal (St. Joachim's Valley, now

Jchymov, Bohemia, then part of the Holy Roman Empire, now part of the Czech Republic) So called because it was minted from 1519 onwards using silver extracted from a mine which had opened in 1516 near Joachimstal, a town in the Ore Mountains of northwestern Bohemia.

Appreciation of rupee means that there is increase in value of rupee in global market or in
simple terms rupee has become stronger than before in global market.

Depreciation of rupee means that there is a reduction in value of rupee in global market

or the rupee has become weaker than before in global market.

To control inflation. To reduce production cost.

Reduce foreign debt.

Cheaper imported goods.

WHY RUPEE NEEDS TO DEPRECIATE: Forex reserve. Major export dependent.

A meant against job lossess.

FACTOR AFFECTS THE EXCHANGE RATE : Dollar selling or buying by exporter and corporate Global price of crude oil Capital inflow and outflow Reserve bank Dollar weakness and strengthening against other

currencies

Price Of Oil:A large portion of Indias import payment is mainly for payment of oil. Internationally, crude prices are named as BRENT, NYMEX, and Dubai Crude. Whenever there is any hike in the oil price per barrel, the Indian Rupee depreciates against the US Dollar. As such, the Indian Government buys . more USD against INR to honor the import liability, resulting in heavy demand for USD. Consequently, the Indian rupee depreciates against USD. The Indian currency market largely depends on the price of Dubai Crude. It is observed that USD appreciates at the end of the month when compared to other days of the month, primarily because of the month-end demand of USD in the wake of payment for imported oil. However, todays market is mature enough, with players of foreign exchange covering themselves against this type of expected fluctuations in the market. Whenever FIIs book profits by selling their shares, the BSE index falls, and at the same time INR depreciates against the USD.

RBI Intervention:The RBI, which regulates the Indian currency market, does intervene whenever it feels it is required to stabilize the market, or to keep market volatility under control. It is the responsibility of the RBI to keep the exchange rate unaffected at a time of volatility in the foreign currency market. It has been observed that RBI intervenes in the currency market whenever there is any abnormal movement in the exchange rate, either upward or downward. The RBI buys foreign currency (USD) to depreciate the domestic currency, and sells foreign currency when the domestic currency depreciates abnormally.

Export-Import:A county's exchange value depends upon its exports to other countries and developed nations like America are having better terms of trade than the developing nations like India as it commands more trade with world countries.

The reason being they produce highly technical goods while developing countries like
India produce agrarian based goods which is not having better terms of trade, when the exports to other countries is more than imports then it means the foreign capital flows in, This is the one reason for our Indian rupee is weaker than US dollar.

Example:Exports from India are of handicrafts, gems, jewelry, textiles, readymade garments, industrial machinery, leather products, chemicals and related products. The mentioned export items contribute substantially to foreign receipts. During the

periods when the dollar was moving high against the rupee.

Political Corruption:It is the shortsighted, selfish, political forefathers of Indian politics are also responsible

for accepting the term of exchanging more rupees in exchange of one dollar. World is
divided in two main segments viz.economically developed countries and under developed countries. India is still a developing country due to its vast population also. India attained its independence in 1947 which is a very youngest country in Asian region, India being

one of the under developed country has to obey to dictates of monetary policies executed
by the World Bank, and international monetary fund. India as a youngest country, since its independence it is begging before the world bank and IMF for loans for its various types of infrastructural development activities, therefore, the world bank and IMF which

are mostly run by officers appointed by the developed countries from western world who
are coming from rich developed countries naturally enjoy upper hand over the monetary issues like exchange value of their currency. Therefore, as of today 66.4047 Indian rupees are exchanged against one US dollar.

SUBMITTED TO:

SUBMITTED BY: BHAWANI SINGH RAWAT PANKAJ VARINDANI M.B.A (FT) I SEMESTER