how the value of currency down or rises explain with example
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Currencies, like any other commodity rise and fall due to demand and supply factors. Explaining this below with few examples:
If a country’s economy is doing well, it usually means that the country’s GDP is increasing and it is producing increasing amount of goods and services. Normally in such a situation, exports also become efficient and the demand for the country’s goods and services increases which inturn increases the demand for the country’s currency (because local producers will ask for payment in local currency). So the country’s currency tends to appreciate. With a strong political mandate given to BJP government in India in 2014, Rupee started appreciating and rose from 67 levels to 64 and was one of the best performing Asian currencies in first half of 2017. The growth numbers in the country were good in the first two years of the NDA reign.
If the economy is doing well, it also usually means a stable political, economic and business environment in the country. So foreign investment in the country increases due to positive business sentiment and the denand for local currency increases. In the second half of 2017 in India, stunted growth numbers during the NDA reign on account of demonetisation and GST, changed the economic outlook for the country to negative, which has led to slowdown in foreign investment. This has been one of the reasons for the Ruppee’s slide in second half of 2017.
A stable economy also usually has a growing equity markets. So FIIs rush to the country to invest in equity markets and thus demand for local currency increases. In Aug’17 and Sept’17, FIIs have been net sellers in the India. Due to perceived slowdown in economy, they are exiting the equity markets and this is one of the reasons for sudden Rupee depreciation in Aug and Sept’17.
The interest rates in the country also affect the demand for the country’s currency. Because outsiders will want to hold the country’s currency and gain from higher interest rates. They would also want to invest in local bond market because with higher interest rate, bond rates will be higher too. In the second half of 2017, with news of interest rate hike by Fed in US, the dollar has been appreciating against all currencies. On the other hand, with falling interest rates in India during same period, the demand for Ruppee has gone down, leading to its fall.
Mark brainliest..
If a country’s economy is doing well, it usually means that the country’s GDP is increasing and it is producing increasing amount of goods and services. Normally in such a situation, exports also become efficient and the demand for the country’s goods and services increases which inturn increases the demand for the country’s currency (because local producers will ask for payment in local currency). So the country’s currency tends to appreciate. With a strong political mandate given to BJP government in India in 2014, Rupee started appreciating and rose from 67 levels to 64 and was one of the best performing Asian currencies in first half of 2017. The growth numbers in the country were good in the first two years of the NDA reign.
If the economy is doing well, it also usually means a stable political, economic and business environment in the country. So foreign investment in the country increases due to positive business sentiment and the denand for local currency increases. In the second half of 2017 in India, stunted growth numbers during the NDA reign on account of demonetisation and GST, changed the economic outlook for the country to negative, which has led to slowdown in foreign investment. This has been one of the reasons for the Ruppee’s slide in second half of 2017.
A stable economy also usually has a growing equity markets. So FIIs rush to the country to invest in equity markets and thus demand for local currency increases. In Aug’17 and Sept’17, FIIs have been net sellers in the India. Due to perceived slowdown in economy, they are exiting the equity markets and this is one of the reasons for sudden Rupee depreciation in Aug and Sept’17.
The interest rates in the country also affect the demand for the country’s currency. Because outsiders will want to hold the country’s currency and gain from higher interest rates. They would also want to invest in local bond market because with higher interest rate, bond rates will be higher too. In the second half of 2017, with news of interest rate hike by Fed in US, the dollar has been appreciating against all currencies. On the other hand, with falling interest rates in India during same period, the demand for Ruppee has gone down, leading to its fall.
Mark brainliest..
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