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How is Rupee Exchange Rate Managed
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Currency fluctuation
How currency rates are managed?
There are mainly two ways by which currency rates are managed.
1. Some countries fix their currency against dollar.
In this case the exchange rate doesn’t change.
The Government takes action to manage any fluctuation that may happen.
2.Some countries leave it to the market to decide their exchange rate. In this system, countries do not manage or interfere in the currency rates which are determined by the markets.
Indian Rupee is partially convertible which means India doesn’t have a fixed value of rupee against dollar but it also doesn’t keep its currency completely floating against dollar. India has a system where the central bank allows rupee to fluctuate within a specified range.
Broadly Rupee appreciation means that the economy is gaining strength while depreciation is taken to mean that the economy losing steam or it could mean that the US economy is gaining strength vis a vis other global economies. Usually the exchange rate is not only against the US dollar but against a basket of currencies which determines the exchange rate of of Indian Rupee. |
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