DETERMINANTS OF EXCHANGE RATES MOVEMENT OF DOLLAR AND EURO PRESENTED BY:

Himani ShuklaHarsimran Singh

Introduction In finance, an exchange rate (also known as a foreign-exchange rate, forex

rate, ER or FX rate) between two currencies is the rate at which one currency will be exchanged for another.

Exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers, and where currency trading is continuous

At the beginning of 1999, the was launched as a common currency in 11 European Countries

DOLLAR Dollar (often represented by the dollar sign $) is the name of more than

twenty currencies, including (ordered by population) those of the United States, Canada, Australia, Taiwan, Hong Kong, Singapore, New Zealand, Liberia, Jamaica and Namibia

The U.S. dollar is the official currency of East Timor, Ecuador, El Salvador, Federated States of Micronesia, Marshall Islands, Palau, the Caribbean Netherlands, and for banknotes, Panama. Generally, one dollar is divided into one hundred cents.

EURO The euro (sign: €; code: EUR) is the official currency of the Eurozone, which

consists of 19 of the 28 member states of the European Union: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain

The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar

Euro To Doller Rate Over Last Four Months

Factors Affecting Exchange RatesLong term factors

Balance Of Payments Interest Rate Inflation Money Supply

Short term factors

Central bank intervention Foreign investment flows Political factors Capital movements

When And What Appreciates The Exchange Rates When a country's exports are high, the buyers of these exports need its

currency to pay for those exports.

When the country's central bank increases interest rates. When the demand of the currency is high in foreign exchange market.

Due to Government borrowing or loosening of fiscal policy.

Factors Influencing Depreciation Of The Exchange Rates There is a fall in the world price of a country's major export.

 A deficit on the current account of the balance of payments leads to a net outflow of currency.

A country's central bank reduce monetary policy interest rates, leading to a net outflow of money.

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