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How is the value of the rupee decided ?

When the we say the rupee has fallen OR rose sharply what does that mean ? What regulates it ?

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  • sarayu
    Lv 7
    1 decade ago
    Favorite Answer

    The usage of fall and rose are based on the equivalent rupees for a dollar all these days. Now even euros can be compared for that. Two factors decide this:

    1. Money in circulation vis-a-vis available reserve of gold with the government. 2. Foreign borrowings and debt that we owe, combined with the foreign currencies available with us and of course the gold as security for the same.

    Hence import and export of goods and payments for the same will have a direct bearing on the value of rupee.

    VR

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  • 1 decade ago

    All currencies are interlinked via the money market. The value of a currency depends on the demand and supply of that currency (this is when we talk about a floating exchange rate which is what we have).

    Suppose a european firm wants to do more business in India, it will demand more rupees. It will therefore buy more rupees with euros. This will lead to an increase in the value of the rupee with respect to the euro. Suppose the government makes more rupees availabale (i.e. increases the money supply) - then the value of a rupee drops.

    There are of course other factors that are also important but this is in essence the basic explanation. Research exchange rates on google for more info. Happy finding!

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  • 1 decade ago

    Value of rupee is decided as any sort of currency.the factor includes all the following :

    gold reserves ,PPP (purchasing power parity),poverty issues

    ,debt issues etc

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