As regards the two way movement of exchange rate of Indian Rupee, it is advised that the Reserve Bank does not control the foreign exchange rate of Rupee. The exchange rate of the Rupee is largely determined by demand and supply conditions in the foreign exchange market.
What is the relationship between demand for foreign exchange and exchange rate?
Exchange rate of foreign currency is inversely related to the demand. When price of a foreign currency rises, it results into costlier imports for the country. As imports become costlier, the demand for foreign products also reduce. This leads to reduction in demand for that foreign currency and vice-versa.
Can we buy other country currency?
You can buy foreign currency in several ways. … Go to a forex dealer or travel agent: Similarly, you can buy foreign exchange from your travel agent. You can also buy foreign exchange from Reserve Bank of India (RBI)-authorised foreign exchange dealers. You should compare exchange rates offered before buying.
What is exchange control of RBI?
One of the important central banking functions of the Reserve Bank of India (RBI) is the maintenance of the external value of the rupee. As such it has been given the custody of foreign exchange reserves and sole agency for the administration of exchange controls in India.
How does RBI get forex?
Reserve Bank of India accumulates foreign currency reserves by purchasing from authorized dealers in open market operations. … Gold – As of March 2021 RBI held 695.31 metric tonnes of gold. 403.01 metric tonnes of which is in custody of Bank of England and Bank for International Settlements.
Which country has highest foreign reserve?
Countries with the highest foreign reserves
- China – $3,349 Billion.
- Japan – $1,376 Billion.
- Switzerland – $1,074 Billion.
- India – $612.73 Billion.
- Russia – $597.40 Billion.
What are the disadvantages of exchange control?
But, when several countries resort to exchange control, the following ill-effects may be noticed:
- It develops economic nationalism but obstructs economic co-operation internationally. …
- It leads to the contraction of foreign trade and the world’s welfare at large.
Why do we demand foreign exchange?
When price of a foreign currency falls, imports from that foreign country become cheaper. So, imports increase and hence, the demand for foreign currency rises. … When a foreign currency becomes cheaper in terms of the domestic currency, it promotes tourism to that country. As a result, demand for foreign currency rises.