FOREIGN EXCHANGE RATE

DETERMINATION POLICY
AND
$-Rs EXCHANGE RATE

Prepared By- SHUBHANSH VERMA (02)

YOGENDRA PRATAP SINGH (51)
SONAM(07)
UTKARSH SINGH (25)
YOGENDRA (49)

In The Guidance Of

Prof.G.R.ARORA
 INTRODUCTION
• OPEN ECONOMY

• FOREIGN EXCHANGE MARKET

• FOREIGN EXCHANGE RATE

1.Bilateral nominal exchange rate
2.Real exchange rate

• BALANCE OF PAYMENT
 DETERMINATION OF THE
EXCHANGE RATE
• FLEXIBLE EXCHANGE RATE

• FIXED (pegged) EXCHANGE

RATE

• MANAGED FLOATING
Exchange rate management :
The International experience

Gold standard
Aureus minted in 193 by
Septimius Severus

Without gold standard govt. can

Aureus minted in 193 by
print as much as money as they
Septimius Severus want ,destroying wealth through
inflation .A German Woman in 1924
feeding a stove with currency
notes ,which burned longer than the
amount of firewood they could buy.
Bretton
Woods
System

John Maynard Keynes (right)

And Harry Dexter White (left) at the
Bretton Woods Conference
 CURRENT SENEARIO
• A number of economist have referred to the system of currency
relations which evolved after 2001, in which currencies, particularly the
Chinese renminbi (yuan), remained fixed to the U.S. Dollar as Bretton
Woods II. The argument is that a system of pegged currencies is both
stable and desirable, a notion that causes considerable controversy.

-- AT G-20 SUBMIT --
• On Sept 26,2008 French President NICOLAS SARKOZY , currently
also the President of European Union, said, “We must rethink the
financial system from scratch, as at Bretton Woods.”

• On oct 13,2008, British Prime Minister GORDON BROWN said, “We

must have a new Bretton Woods, building a new international
financial architecture for the years ahead.”
PATH OF INDIAN RUPEE
1947-2008
• As stated by Subroto roy ex. Consultant
of IMF ( International monetary fund )

• Indian rupee had followed the initial

devaluation with Sterling in 1949 and was
maintained at the same per value for the
next 16 years.

• In 1966 the rupee was devaluated by

57.5% to Rs.7.50 per again US dollar.
• But overall during 1960-1970s Indian
economy continued to suffer egregious
shocks. but still the value of Indian rupees
was not adjusted downward.

• again during 1971 Indian rupee was

devaluated against sterling and
maintained the same rate of Rs. 18.97 as
sterling up to 1972.

• Three small devaluation occurred against

sterling by a total of 2 percent between
1972-1975.
• In 1975 India delinked from sterling and
pegged. With in 2.25 % until jan. 1980.

• In 1981-1991s value of Indian rupee

decreased by 40 % where us dollar also
fall down against major currencies.

• In 1991 due to economic reforms when

the abolishment of import quotas and
removal of export subsidies was done by
government rupee devaluated by 9 & 11
% respectively.
• In march 1992 the LERMS involving dual
exchange rate was introduced.

• On march 1993 the Indian rupee was

begun to be made convertible for purpose
of current account transaction.

• The exchange rate of rupee must

necessarily be seen as an administered
price and not a market determined price.
 $-Rs Exchange
• Why Dollar ?

• Determination of Exchange Rate.

• Cross Exchange Rate.

• Types of transaction.
Present Scenario
ANY QUERY ?????????
THANK YOU…….