This results in poor economic performance, which then keeps investors away from the country’s economy. Oftentimes, countries across the globe may experience political instability. Impact of political instability on economy.90 for 1 USD, the economy is expected to remain strong as exports will benefit although imports may get costlier. Therefore, even if the Rupee weakens further against the Dollar to touch an exchange rate of Rs. This could further lead to currency devaluation.Īs per IMF projections, India is one of the fastest-growing economies in the world. However, if inflationary conditions continue for an elongated period, higher interest rates cannot save the currency. Higher interest rates tend to attract more foreign investments to the country and this boosts the country’s currency. Whenever there are rising inflation scenarios, central banks rush to increase interest rates to bring down inflation. Interest rates and inflation are also interlinked. Thus, we can see the rupee weakening against the dollar. The higher the inflation, the weaker will be the country’s currency.Ĭurrently, as we are witnessing a period of rising inflation in India, the purchasing power of rupee is going down. Therefore, inflation tends to be inversely related to any currency’s strength. As prices rise, the purchasing power of currency declines. Inflation is an economic scenario where prices of generally used goods and services rise over an extended period of time. Here are some of the key factors that determine the exchange rate between rupees and dollars: List of factors impacting Rupee-Dollar exchange rate For instance, the Rupee-Dollar exchange rate is represented as USD/INR. The global forex market is very large and highly liquid, with large-scale transactions taking place on a daily basis.Ĭurrency exchange rates always involve two currencies at a time, one being exchanged for the other. Currency exchange rates also impact foreign exchange trading or forex trading. The U.S dollar is one of the standard currencies accepted globally for the trading of commodities. So, how is this exchange rate determined and what are the factors that affect this exchange rate? Here is all you need to know. This means every 1 U.S Dollar will fetch 79 Indian Rupees. As of June 2022, the Rupee-Dollar exchange rate is $1= Rs.
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