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The Indian Rupee closed marginally changed against the US Dollar, settling at 93.06.
Market activity was characterized by position unwinding and hedging by importers.
The previous session's closing rate for the Rupee was 93.10 against the dollar.
The foreign exchange (forex) market is where currencies are traded. The exchange rate, like USD-INR, reflects the value of one currency relative to another. Daily movements are influenced by various factors including trade flows, capital movements, interest rate differentials, and market sentiment. 'Hedging' is a strategy used by businesses (like importers) to protect themselves from adverse currency fluctuations by locking in an exchange rate for future transactions. 'Position unwinding' refers to the closing of existing financial positions by market participants, which can involve selling previously bought assets or buying back previously sold ones, often to realize profits or cut losses.
Simple Analogy: Imagine you're buying a toy online from another country. If the price of that country's currency goes up before you pay, your toy becomes more expensive. Hedging is like paying a small fee to lock in the price today, so you don't have to worry about future price changes. Position unwinding is like selling a stock you bought earlier because you either made enough profit or want to limit your losses.
RBI's interest rate decisions and liquidity management influence capital flows, which in turn affect the Rupee's value.
The difference between India's exports and imports (Current Account Deficit/Surplus) is a major determinant of demand and supply for the Rupee.
Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) significantly impact the Rupee's strength by increasing or decreasing demand for the currency.
A depreciating Rupee can lead to 'imported inflation' as goods purchased from abroad become more expensive in local currency terms.
GS Paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Government Budgeting. Investment models.
General Awareness: Indian Economy, Financial Markets.
Financial Awareness: Indian Financial System, Banking Terms, Current Economic Affairs.
General Awareness: Indian Economy, Current Affairs.
Consider the following statements: 1. Most of India's external debt is owed by governmental entities. 2. All of India's external debt is denominated in US dollars. Which of the statements given above is/are correct?
Answer: Neither 1 nor 2
Which one of the following is not the most likely measure the Government/ RBI takes to stop the slide of Indian rupee?
Answer: Following an expansionary monetary policy
With reference to 'IFC Masala Bonds', sometimes seen in the news, which of the statements given below is/are correct? 1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank. 2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector. Select the correct answer using the code given below.
Answer: Both 1 and 2
High (regularly features in economy sections of competitive exams, especially for conceptual understanding).
A strategy to reduce financial risk by offsetting potential losses from adverse price movements.
Closing out an existing financial market position.
The value of one currency in terms of another.
An exchange rate system where the currency's value is largely market-determined but subject to intervention by the central bank.