Determinants of exchange rate of Indian rupee against us dollar
Monica S, Dr. Santhiyavalli G
Exchange rate plays a denominate role in a country’s international trade there by influencing the country’s balance of payment. It is highly volatile in nature and it is determined by the market forces of the economy. The fluctuations in the movement of exchange rate is affected by the several macro-economic variables. This paper focuses on the macro economic variables Balance of payment-current and capital account, Foreign exchange reserve, foreign investment inflows, Inflation rate, Interest rate, Net purchases and sales of US dollar, GDP at factor cost affecting the exchange rate of Indian rupee against US dollar. The study covers the period of seven years from 2008-09 to 2014-15.Augmented Dickey Fuller test (ADF) test was conducted to determine the stationarity of the variables. It is observed that three variables Balance of Payment–Current account, Foreign exchange reserves and GDP at factor cost are the most significant variables affecting the exchange rate of Indian rupee against US dollar during the period of study.