Finance, Forex and Investments

who control the rate of exchange of indian currency into an ohter foreign currency?

just i want to know that who said that today the rate of indian currency sholud be this and that ???

Public Comments

1. The Indian Currency is like a commodity in the exchange market. Thus, its rate is affected by the demand and supply mechanism. The more the demand for the currency, the more stronger it gets and vice versa. Broadly speaking, the following factors affect the exchange rate. 1) The Economic and Political stability in the country. If there is chaos on both these fronts, foreign people would not like to Invest in that country thus leading to fall in demand for that country's currency. 2) If the Inflation rises in the country, it will affect the exchange rate as now due to Inflation, the currency value would begin to depreciate. This is because now the people would prefer to import the goods and services at cheap prices rather than purchasing them domestically. This would make the currency of the exporting country relatively stronger in comparison to currency of the domestic country. This is called Purchasing Power Parity Theory for explaining the fluctuations in exchange rates. 3) If Domestic Banks are lending money at high rates of Interest, then people would prefer to borrow from foreign countries where rate of interest is lower. That would weaken the value of domestic currency against the currency of the country from where cheap loans are borrowed. This is called the Interest Parity theory for explaining the exchange rate fluctuations.
2. In India exchange rate is controlled by Reserve Bank of India through managed floating exchange rate system. when dollors demand increased then rupee value is depreciated at that time RBI entered in currency market with increase the supply of dollers.
3. Reserve Bank of India.
4. there are number of factors depend on which moves currency rates like...import export....investment of FII's, and country's self economic status........