You are here
Why value of rupee is decreasing against dollar value
Do you know why the value of rupee is decreasing against the dollar value ? What Market forces determines the exchange rate of money ? Lets discuss them :
- As India is an emerging economy, lots of investing is coming outside from the country and when more money is getting invested, the demand of currency will be up so the and rupee value will be increased against dollar. But when investors are pulling out their investment the demand of currency will go down and so the value of rupee will decrease against dollar. It was a normal example just to make this concept understandable.
- Then Inflation is also a factor for exchange rate value. If any country has a low inflation rate then its currency value increases. As we have seen reduction in currency values for those countries which have higher inflation rates.
- Difference in Interest rates is also a factor that affects exchange rate value.
- Trade Factor means exporting and importing ratio is also a major factor for this. If a country is exporting more in monetary values then it is importing then it will be generating more revenues from exporting. But if increase in rate of export is lesser than rate of import then value of its currency decreases with trading countries.
- Economic conditions and Political stability also matters for exchange rate value.
These are the major factors which affects the exchange rate of money or currency.