The Indian foreign exchange market is predominantly transaction based, and corporate purchases and sales of foreign currency are based on an underlying position. An underlying position is the need to buy foreign exchange to meet an overseas commitment, or the need to sell foreign exchange because of receipts of foreign currency. All foreign exchange transactions of Government of India are [...]
Foreign exchange in India has been regulated in one form or the other since Independence. The Foreign Exchange Regulation Act (1947) was enacted as a temporary measure to deal with an acute foreign exchange crunch in the post-World War II period. Since the foreign exchange position continued to remain precarious, this temporary measure was made permanent in 1957. In 1973, [...]
The following points highlight the top four theories of exchange rates. The theories are: 1. Purchasing Power Parity Theory (PPP) 2. Interest Rate Parity Theory (IRP) 3. International Fisher Effect (IFE) Theory 4. Unbiased Forward Rate Theory (UFR). 1. Purchasing Power Parity Theory (PPP): The PPP theory applies to commodities. There are two variants of the PPP: the absolute PPP [...]