VALUE OF $ INCREASES,RUPPEE FALLS !

VALUE OF $ INCREASES,RUPPEE FALLS !

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How does the value of rupee fall?

The currency in your wallet is always on the move. But do you know as the value of dollar increases, the value of rupee falls?  The foreign exchange rate for conversion of currencies depends on the market scenario and the exchange rate being followed by the countries. Many factors contribute to this fall. "The recent fall in the rupee was mainly due to conditions in the euro zone, plunging stock markets, falling foreign investment inflows and strengthening of the dollar," says Brahmbhatt of Alpari.

The BSE SENSEX (Bombay Stock Exchange Sensitive Index),  free-float market capitalization-weighted stock market index of 30 companies listed by the Sensex. These 30 companies are some of the largest companies and are also representatives of the industrial sectors in the Indian economy. If the Sensex falls or crashes,gradually the value of Indian rupee also falls, which leads to instability in the Indian economy.

 Foreign Institutional Investors (FII) have shifted from the Indian markets during the financial year 2011. The FII’s lead to high influx of dollars into the Indian markets. FII in the developing markets has decreased considerably from 19.2 % in 2010 to 3.8% in the year 2011. As FII’s are taking out their investments from the Indian markets,it has led to increase in demand for the dollars, further leading to a fall in the value of the rupee.

European markets also contribute to the fall of the Indian Rupee. Global economy has become essential due to the European debt crisis. Due to the European debt crisis, foreign investors have considered dollar as a safe haven for their investments in their longer run. This again leads to demand for the dollars and a decrease in value of the rupee.

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