...The derivative word rūpaya[citation needed] was used to denote the coin introduced by Sher Shah Suri during his reign of 1540 to 1545 What is Rupee Appreciation & Rupee Depreciation Rupee Appreciation & Rupee Depreciation (instead of using the word ‘currency’ we are using ‘rupee’ for the Indian context and explain the fluctuation with respect to dollar). When rupee is said to be appreciating it means that our currency is gaining strength and its value is increasing with respect to dollar. However, when rupee depreciates it means our currency is getting weaker & its value is falling with respect to dollar. You can understand it with the following example: Suppose, currently, the exchange rate is Rs. 45 = $1, 10 months later, either of the following two cases can happen Case1: The exchange rate is say Rs. 40 = $1. This means rupee has appreciated or gotten stronger by approx 11% and you would be paying less to for a dollar Case2: The exchange rate is at Rs. 50 = $1. This means rupee has depreciated or gotten weaker by approx 11% and you end up paying more for a dollar. Factors Influencing rupee fluctuation Rupee’s appreciation or depreciation against the dollar depends on the change in demand and supply for both the currencies. If the demand for rupee is comparatively high, rupee appreciates; if low, it depreciates. The important question here is ‘what factors drive the demand for a currency?’ They are: * Interest Rate: A demand for a currency is hugely...
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...The Indian Rupee Crisis Economics Essay-1 In this paper we are going to examine the cause and the impact of rupee depreciation on the Indian economy. Since last few months Indian rupee came under great stress as overseas investors are paring their exposure to Asia’s third-largest economy amid international uncertainty and mounting worries over the domestic economy. In 2009 – 2010 the exchange rate was hovering around the 43 – 45 rupees per US Dollar level. And now it is around 55 – 56 levels, the main reasons to examine are increase in import bill, higher inflation, fiscal mismanagement and all resulting in higher cost of borrowing. The rupee has lost more than 15% of its value this year, making it one of the worst performing currencies in Asia. This paper reviews the probable reasons for this depreciation of the rupee and the outlook for the same. It also reflects on the policy options to help prevent the depreciation of the Rupee. This paper will firstly discuss about the economy of currency to give an overview of the problem and the factors related to it. Afterwards it will be examining the causes of the Indian rupee depreciation with respect to the Indian economy and the global economy. And after that it will analyse the impact of the same on trade and business. Finally, recommending the policy actions in response of the falling currency. II. LITERATURE REVIEW: These papers include the work which have been used as a basis or reference for formulating the policies regarding...
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...The exchange rate fluctuations in India has been a topic of apprehension for the policy makers and common public. The exchange rate system in India, known as managed float, has evolved through a long process of probing for an suitable policy system for India. in view of the fact that exchange rates are relative prices of two currencies it is generally exaggerated by the relative productivity differential and real wage rates in the long-run. However, the bubbles arising out of assumption plays a major role in influencing the exchange rates in the short-run. The present state of affairs about the exchange rate fluctuations in India has been caused to a large extent by the worsening current account balance and the unfavorable expectations related with it. On the other hand, the question of interference by the government in the exchange rate market should be decided on the foundation of the impact of such exchange rate fluctuations on the real effective exchange rate and the likely effects on the employment situation in the country. There are an array of factors affecting the exchange rate fluctuations like interest rate, balance of trade, money supply, economic growth, foreign debt, inflation etc. India has seen a huge breakdown of the Rupee because of the adverse affects of these factors on the Indian currency. Mentioned below are the various sectors being affected by the Rupee depreciation. Fuel Price: India imports most of its oil consumption. As a result of dwindling of...
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...Rupee: A Testing Time for India Authorities The currency of a country often reflects its economic, political, geopolitical strength of the country. The currency swings often capture the capital movement and investor appetite in a comprehensive way. With dollar remaining as the major foreign currency for foreign trade and foreign reserve, the developing countries have limited options to control their respective currency. This same was experienced by many developing Asian countries in the recent financial rout. Determination of Exchange Rate and its Fluctuations Like other prices, exchange rate also changes with the changes in the state of market. Just as other prices depend on supply and demand, exchange rate also depends on the configuration of forces of supply and demand. However, two important facets have to be noted: (i) Unlike goods and services, foreign exchange has no direct cost of production. It has only opportunity cost (Walras.1874). Import bills have to be paid through export earnings. So cost of production of exportable surpluses may be taken to constitute the direct production cost of exports and indirect cost of imports (Aggarwal, R. (1981)). Opportunity cost is accounted by with drawl of exportable surplus from domestic consumption. Fluctuations are a natural characteristic of foreign exchange rate market, provided that the exchange rate is not an administered price. If exchange rate is an administered price, it is determined administratively by the central...
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...Wisconsin back in 1962. Today Kohl’s operates approximately 1,160 family-oriented department stores in the United States and is now trying to establish its business in India. According to Kohl’s .com Investor relations, the company is involved in retail trading of merchandise in different forms. The company position is between the higher-end department stores and the discounters, selling everything from candy to engine oil to sporting equipment. Kohl’s stores are stocked with everything customers need for themselves and their homes - apparel, shoes & accessories for women, children and men, plus home products like small electrics, bedding, luggage and more. Kohl’s is a retail-trading business that would be a good fit entering into the Indian Market. India as a country is improving year after year in many phases and the economy of India has improved dramatically over the last decade. Because of the improvement’s year after year, India may establish itself as one the best economies going forward. The population of India is estimated to increase by 283,272,877 (22.4%) to 1,550,674,726 in the year 2100. (Blue Marble Citizen, n.d.). as the population grows, the income levels for people have gone up and they will spend more money in such merchandise that kohl’s offer. The income levels of people in India have come up because of the good numbers of employment generation from industrial development growth. There are other retail business owners in India who operates a small number...
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...Best Buy enters India by Francisco Polo Professor Hamid Assar International Finance – FIN535 May 22, 2012 Summary Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Puerto Rico, Mexico, Canada and China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates under both the Best Buy and Future Shop label. Together these operate more than 1,150 stores domestically and internationally. In addition, the company operates over 100 Best Buy Express Automated Retail stores or "ZoomShops", operated by Zoom Systems, in airports and malls around the U.S. The company is headquartered in Richfield, Minnesota, United States. On March 9, 2009, Best Buy became the largest electronics retail store (online and bricks and mortar) in the eastern United States, after smaller rival Circuit City went out of business. Fry's Electronics remains a major competitor in the western United States, while Hhgregg remains competitive in the eastern United States. Many locations feature in-store pickup, which can be arranged through the company's website. As of December 28, 2008, the company operated 1,010 Best Buy Stores, 13 Magnolia Audio Video Stores (specializing in high-end electronics), 7 stand-alone Geek Squad stores, 3 Audio Visions Stores, 13 Best Buy Mobile Stores (standalone) and...
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...firms, and have weaker capital base, losses through exposure to various risks can result in more severe impact on profits and operating efficiencies for MSMEs than for large firms. (Export) Foreign exchange risk in particular, impacts firms engaged in exporting, importing, and borrowing in foreign currency. Rupee appreciation benefits importers as it decreases rupee prices of imported goods and harms exporters as it increases foreign currency prices of exported goods. Rupee depreciation harms borrowers who take loans in foreign currencies that are cheaper than Indian loans. (Export) Since currency fluctuations adversely impact MSMEs, they should determine their risk exposure to various currencies, as well as adopt risk mitigation strategies and methods. • (Export)The currencies to which the firm is exposed to • The extent of sales / purchases /receivables / payables denominated in foreign currencies • The extent to which price fluctuations can be passed on to customers (by increasing price or by entering price variance clauses) • Cash flow position of the firm and ability to withstand currency fluctuations • Impact of currency fluctuation on overall profitability of the firm (Export) Works Cited Export. (n.d.). Retrieved August 31, 2013, from Small B:...
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...Rupee Depreciation- Why is it depreciating? Describe the impact on India’s Macroeconomics. The depreciation of rupee against the dollar is not a recent phenomenon. If we see the valuation of rupee over the past six decades, i.e., post-independence, we can see a continuous downward trend. Though there have been temporary fluctuations in the value, the general trend has been negative. To find the root cause of this phenomenon we need to go 200 years back. Prior to the 18th century most of the economies around the world followed the Silver standard. But then these economies switched to the gold standard, due to the devaluation of Silver as the supply of Silver increased due to increased mining activities. But the British rulers of India did not allow the Indian currency to switch to the gold standard. This resulted in a structural weakness of the currency, which we can still feel to this day. Another landmark episode in the depreciation of the rupee was the 1991 liberalization reforms. Post the reforms the rupee was devalued and allowed to float against the dollar to make Indian exports competitive and shore up more dollars into our reserves. Although we have reaped the benefits of this devaluation for long, the current depreciation is hurting the economy. Now moving on to the recent volatilities in the valuation of rupee, we can see the cause can be attributed to a number of policies and events occurring onshore as well as around the globe. The first would be the strengthening...
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...Management Research Vol.1 Issue 11, November 2012, ISSN 2277 3622 Online available at www.indianresearchjournals.com INDIAN CURRENCY FUTURES: AN ANALYTICAL STUDY OF ITS PERFORMANCE DR. DEVAJIT MAHANTA* * Vice President-Benzcom Consulting Pvt. Ltd. 3A-Oberon Appartement, 6-Lamb Road Ambari, Guwahati-781001, Assam, India ABSTRACT Since its inspection in 2008, currency derivative trade in India had experienced explosive growth, both in volumes and value over the years across all the four currencies contracts that were in operation in INRUSD, INRGBP, INREUR and INRJPY. However in terms of the open interest currency derivatives trade in MCX is more as compared to the NSE. By consider both stock and commodity exchanges for launching currency futures contracts government of India has done a commendable job which is expected to increase the number of quality players, introduce healthy competition and boost trading volumes of Indian currency futures. The global markets (mainly USA) become active only after Indian markets close at 5.00 pm and as a result there is an evident fear about the risks associated with overnight fluctuations in the currency pair. Therefore the functioning as well as the profitability in Indian currency futures is effected by the current performance of the international currency futures market. It is imperative that any evaluation, projection on Indian currency futures market should be undertaken keeping the international market in perspective. KEYWORDS: Currency...
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...Management Research Vol.1 Issue 11, November 2012, ISSN 2277 3622 Online available at www.indianresearchjournals.com INDIAN CURRENCY FUTURES: AN ANALYTICAL STUDY OF ITS PERFORMANCE DR. DEVAJIT MAHANTA* * Vice President-Benzcom Consulting Pvt. Ltd. 3A-Oberon Appartement, 6-Lamb Road Ambari, Guwahati-781001, Assam, India ABSTRACT Since its inspection in 2008, currency derivative trade in India had experienced explosive growth, both in volumes and value over the years across all the four currencies contracts that were in operation in INRUSD, INRGBP, INREUR and INRJPY. However in terms of the open interest currency derivatives trade in MCX is more as compared to the NSE. By consider both stock and commodity exchanges for launching currency futures contracts government of India has done a commendable job which is expected to increase the number of quality players, introduce healthy competition and boost trading volumes of Indian currency futures. The global markets (mainly USA) become active only after Indian markets close at 5.00 pm and as a result there is an evident fear about the risks associated with overnight fluctuations in the currency pair. Therefore the functioning as well as the profitability in Indian currency futures is effected by the current performance of the international currency futures market. It is imperative that any evaluation, projection on Indian currency futures market should be undertaken keeping the international market in perspective. KEYWORDS: Currency...
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...Student Name: Sanjay Kumar Gupta SMS Id: 110604 Center: Grand Mall – Gurgaon Assignment: International Financial Management Batch: PGCBM-21 Title: MNC Response to Currency Crisis Professor Name: Dr. HK Pradhan MNC Response to Currency Crisis Introduction A currency crisis means a decline in the value of country currency, the decline in value of currency have impact on the economy of country negatively. Decline in value of currency means same currency will not buy anther currency as it was buying earlier. Currency crisis happens because of investor expectation/act and the result of those acts. Currency crisis generally happens due to sudden devaluation of the currency. Following are the reason which makes a currency crisis: 1. Current account deficit. 2. Currency value increased rapidly. 3. Uncertainty over government actions and policies. 4. Sudden outflow of capital by speculators. 5. If investors' confidence in the stability of an economy is eroded, then they will try to get their money out of the country. This is referred to as capital flight. Once investors have sold their domestic-currency denominated investments, they convert those investments into foreign currency. This causes the exchange rate to get even have further impacted, resulting in a run on the currency. 6. Currency outflow will be there till the time reserves are getting finished. Speculators foresee this potential opportunity for a capital gain and compete against each...
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...Why should we hedge? Business is exposed to several risks, currency risk being one of them Objective of hedging is to ensure: Predictability in Income Statement thereby reducing cash flow volatility. Revenue is generated & receivables are collected at budgeted rates Maintaining margins on long term projects as these projects are priced & bid with an exchange rate assumption, which needs to be protected to ensure desired margins Managing the translation risks in case of multiple geographies & overseas entities Best Practices A good risk management and hedging policy should be debated, understood & approved at the highest level (Board) The policy should indentify risks entity is exposed to, ways to measure these risks & suggest methods to mitigate these risks Should specify clear identification of responsibilities, authorities & limitations on its implementation Should state the purpose of hedging clearly - profit, protection, reducing volatility. Should suggest appropriate risk management tools like Sensitivity Analysis, VAR to contain risks Should be reviewed periodically by board in view of changing risks, market dynamics. Enctheirage use of natural hedges to reduce hedging costs METHODS OF HEDGING Methods of hedging can be classified as a. Internal methods b. External methods ...
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...MNC Enters India Finance 535.003 Provide a brief summary of the business you chose. Nucor Corporation is one of the world’s largest steel manufacturing multinational corporations (MNCs) comprised of more than 20,000 employees worldwide (Nucor, 2013). The company is among the top 2 steel manufacturers in the United States, along with U.S. Steel Corporation, with more than 20 million tons of steel produced in 2012. Nucor’s mission is to take care of their consumers with the help of the corporation’s teammates (employees), by producing safe high quality steel at a low cost (Nucor, 2013). They will obtain this goal in conjunction with being most profitable and productive. The corporation has 22 locations in the U.S. and 9 locations in 8 countries, none of them being India (Nucor, 2013). Nucor is broken down into 4 main segments: steel mills, steel products, raw materials and all other (Nucor, 2013). While the company has remained profitable for years, with annual sales of $19.4 billion U.S. dollars, rising steel prices has plagued the steel industry resulting in many steel companies’ sales declining (Nucor, 2013). This can be attributed to steel producers being reluctant to cut prices in spite of lower demand. Many of these issues coming from declining sales have said to have been rooted from China’s inexpensive sales of cheap steel products (Gael, G., 2013). Nucor’s CEO has pleaded for restrictions to be made on trade of Chinese made steel (Gael, 2013). India is in...
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...A PAPER On “CONVERTIBILITY OF INDIAN RUPEE” By, Sr. No | Name | PRN | 1 | Mr. Sachin Jadhav | 15020448102 | 2 | Mr. Santosh Ghongade | 15020448103 | 3 | Mr. Rajan Batra | 15020448104 | 4 | Mr. Narayan P.S | 15020448105 | 5 | Mr. Sameep Gadkari | 15020448106 | 6 | Mr. Nandkumar | 15020448015 | 7 | Mr. Bhushan Patil | 15020448027 | 8 | Mr.Vikrant Birje | 15020448056 | Guided By, Prof.S.K.Vaze International Financing TABLE OF CONTENTS Sr. No | Topics | Page No. | 1 | Objectives | 3 | 2 | Foreign Exchange-An Overview | 3 | 3 | Convertibility of Indian Rupee-History | 4 | 4 | Convertibility of Currency-Meaning | 4 | 5 | Current Account Convertibility | 5 | 6 | Capital Account Convertibility * Important Provisions under FEMA | 6,7 | 7 | Convertibility of Indian Rupee-Positive Effects | 9 | 8 | Capital Account Convertibility-Negative Effects | 10 | 9 | Key Points and Analysis | 12 | 10 | Conclusion and Recommendations | 14 | 11 | Bibliography | 15 | Objectives: A. To know Foreign exchange mechanism followed in the past and current practices. B. To understand the concept of “Convertibility of Currency” C. To Study journey of convertibility of Indian rupee pre and post Liberalisation and impact on exchange rate. D. Brief study of Indian laws of regulations and prohibitions in context of the currency convertibility...
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...bManual on Financial and Banking Statistics LIST OF ABBREVIATIONS ACF AD ADB ADR AFS AGM AIRCSC Auto-Correlation Function Authorized Dealer Asian Development Bank American Depository Receipt Annual Financial Statement Annual General Meeting All India Rural Credit Survey Committee Additive Outliers Auto Regression Auto-Regressive Integrated Moving Average Available For Sale CBS CC CD CD Ratio CDBS CF CFRA CGRA CII CO CP Consolidated Banking Statistics Cash Credit Certificate of Deposit Credit Deposit Ratio Committee of Direction on Banking Statistics Company Finance Combined Finance and Revenue Accounts Currency and Gold Revaluation Account Confederation of Indian Industries Capital Outlay Commercial Paper Consumer Price Index Consumer Price Index for Industrial Workers Capital Receipts Capital to Risk Weighted Asset Ratio Cash Reserve Ratio Council of Scientific and Industrial Research Central Statistical Organisation Central Vigilance Commission Development Action Plan Department of Banking Operations and Development Department of Banking Supervision, RBI Department of Company Affairs, (Now known as Ministry of Companies Affairs, MCA) Government of India AO AR ARIMA AFS CPI ASSOCHAM Associated Chambers of Commerce and Industry of India ATM ATM BIS BOI BoP BPM5 Asynchronous Transfer Mode Automated Teller Machine Bank for International Settlements Bank of India Balance of Payments Balance of Payments Manual, 5th edition Balance of Payments Division, DESACS...
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