who decides currency rate of the country?

Question

How we will measure the currency rate of a particular country.why our currency is weak in comparision to dollars,pound etc. e.g.1 u.s $ = rs 45.5 , 1pound= rs 78.8

Answer 1

The most quoted number is the rate at the Interbank Foreign Exchange Market, where currency is traded just like shares in a share market
an over- or under-valued currency is determined by comparing the enxchange rate with the Purchasing Power Parity (PPP) Exchange rate
http://en.wikipedia.org/wiki/Purchasing_power_parity

Answer 2

Currency Rate is the exchange rate of Other Currency with the home currency. In the instance case the home currency is Indian Rupee. US Dollar, GB Pounds, Euro, Japnese Yen are the few examples of other Foreign Currencies. The rate at which we can purchase or sale these foreign currencies is the currency rate. And it is denominated in Indian Rupees.
e.g. 1 USD = INR 45.50. Here the currency rate is 45.50.

The Foreign Exchange Dealers Association of India better known as FEDAI decides the currency rate of the country.

The Foreign Currency is a tradable commodity. Based on the demand and supply of a particular currency in international market the currency rates are determined.

There are various factors which determine the currency rates. Purchase Power Parity (PPP) is one such important factor which determines currency rate. The purchase power of 1 Re is compared to purchase power of 1unit of Foreign currency for a common commodity/service, this is called PPP. Based on this and other factors inclusive of Political, economical, etc., determine the currency rate.

Answer 3

The currency rate of a country depends on how much people are willing to trade to buy products. All of the currency from different countries is related to all of the currency from other countries in the rate of exchange. A few years ago, China tried to make up their own value for their currency, which they cannot do because they need to look at the rates of other currencies aound the globe.

Answer 4

It is primarily based on how strong the country's economy is, factoring in several items, including debt load, deficit, spending policies, etc... It is also either pegged to a specific currency (such as the Mexican Peso being tied to the US dollar), or the "buying power" based on the ability to purchase certain staples and housing, etc.

The exhange rate is generally set by the assorted "Banks of..." in the form of the Currency Exchequer.

Additionally, it is also based purely on whether your country like mine...

Up until the "Fall of Communism"...the Russian Ruble was worthless - rather the US govenment declared that there was no number of rubles that would equal $1 US.

Answer 5

The parlance in in the internatioonal market for Currency rate is ............. Exchange rate

1. Exchange rate is nothing but .........
the value of a country's currency expressed in terms of another country's currency.

example
1 US dollar ($) = Rs.43.47
1 Sterling Pound ( ) = Rs.85.36
1 Euro ( ) = Rs.57.89

2. the excahnge is determined by various factors, both economical and political

3. In the long run, it is the econmic fundamentals and purchase power parity (PPP) decide the exchange rate.

4. In the short run (less than year), the exchnage is determined following factors
1. demand and supply in the market
2. its indirectly influenced by the trade deficit or surplus
3. the deicit or surplus position in the balance of payments (bop)
4. the performacne of the economic fundamentals (GDP growth, inflation, interest rate differntial, political *** economic news that may affect or help the prospects or interest of overseas business clients, etc.)

5. Why our currency is weak against US $.

In fact our currency has appreciated against the US$ over the last 7 to 8 years.
In 1999, it was ruling at 48.50 or so,
now the rupee has gone stronger to Rs.43.47 per dollar.

Why?

Not because India has trade surplus or bop surplus

true ... that India has made good forex earnings through software industry.

but Rupee appreciated mainly because dollar has gone weak,
american economy is facing depression ......... its unemployment rate has gone up, interest rates have come down, its trade deficit levels have gone up, etc. i.e. the fundamentals of the american economy have performed below expectations.

please read the following extract (from a site) for some more insight on the subject

Its really a market like the stock market or anything else.
Factors such as relative interest rates will play a role, but its not the only factor.
Basically, the amount of a currancy demanded determines its exchange rate versus another.
The flow of goods and services between countries will affect supply and demand as well because you need to pay for a country's goods in a country's currancy.
For instance, if I'm an importer of cars and place an order for 500 BMWs, I need to esablish an account with the required amount of Euros to pay for them.
There are may ways to do this to hedge and save money, but this demand for Euros will affect the exchange rate.

A country's central bank can also affect the exchnage rate by tightening or loosening the money supply.
A looser money supply means more currency is in circulation against another.
The par value should fall and the cost of goods in the country who's currency falls in value falls against another country's stimulating exports. Other countries like China will artificially create an exchange rate by pegging the currency to anothers.
China keeps its currency pegged below the dollar to make its exports attractive.

Another thing will be speculation and arbitrage. You might have a hunch that one currancy will move one way or another so you buy a stake of, say, Euros that support that hunch.
This will have a small effect on the exchange rate.
Another effect will be arbitrage. Not every currency will float at the same value relative to all others at the same time because the dynamics between one economy and others will be different.
One can take advantages of small differences between currency markets and currencies to effect exchange rates and to make money. Arbitrage will eventually even the market out and normalize rates between currencies.
For instance if a currency fallls against the Pound before falling against the Euro, you can get your Pounds by buying Euros first which will move the price of Pounds in Euros.
It isn't possible for a change in one rate to affect others right away. Banks and exchange traders make tidy sums from arbitrage between currencies and between currency markets.
A dollar can trade at one price in NY and at another in Tokyo against any currency.
If you find those subtle differences in an instance before they shift, you can save millions on a large foreign exchange. This is pretty much what the money market is.

There isn't anything to back currencies anymore so rates float on a number of variables.
During the gold and silver standards the value of those metals determined the exchange rates.
Now, that isn't the case. Its a combination of an economy's strength and the whims of the market forces.


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Answer 6

Currency Rate is decided by the 'World Trade Organisation' (WTO). WTO is the institute of all countries in the world. This institute helps to underdeveloped countries like India. It has given us a loan. That loan was very big. Till now, we have not covered that amount of loan. So, therefore our currency rate is low. The country like USA or England has no any burden of loan, in contrast they are giving us the loan. Threfore their currency rate is high. If we want to increase our currency rate, we should become self- sufficient & for this we have to reduce our increasing population.

Answer 7

it is india's central bank and authorties who are responsible for fixing exchange rate fix the value of our currency in terms of other international currencies.