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Asian Journal of Management
Year : 2017, Volume : 8, Issue : 4
First page : ( 967) Last page : ( 974)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2017.00150.0

Trends in Indian Rupee-Us Dollar Rate: An Empirical Analysis

Dr. Kanojia Sunaina1,*, Dhamija Shivali2,**

1Associate Professor, Department of Commerce, Faculty of Commerce & Business, Delhi School of Economics, University of Delhi, 110007

2Assistant Professor, Shri Ram College of Commerce, University of Delhi, Delhi

*Corresponding Author E-mail: sunainakanojia@gmail.com

**rijhwanishivali@gmail.com

Online published on 2 June, 2018.

Abstract

The paper attempts to identify Indian and US macroeconomic factors and other global factors significantly influencing Indian rupee-US dollar spot rate and also, any long term association among these macroeconomic variables and rupee-dollar spot rates. Time series analysis has been undertaken for ten year period of April, 2005-March, 2015 using monthly data of these variables. The exogenous variables considered are money stock (India and US), nominal long run bond yield (India and US), commodity price levels (India and US), stock prices (India and US), forward premium in Indian rupee-US dollar forward market, foreign exchange reserves with Reserve Bank of India., foreign institutional investment in India, Indian rupee-euro spot rate, Indian rupee-British pound spot rate and Indian rupee-Japanese yen spot rate. Ordinary least squares regression results indicate that significant non-price variables are foreign exchange reserves and RBI intervention measure, both being negatively related to rupee value. Out of price variables, consumer prices in US, rupee-euro spot rate and rupeepound spot rate are significant variables, all being positively related to rupee value and US 10 year bond yield is negatively related to value of rupee. Johansen's co-integration analysis indicate that all Indian and US macroeconomic variables and other currency pairs of rupee are in a long run relationship with rupee-dollar spot rate.

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Keywords

Indian foreign exchange market, Indian rupee, Johansen's co integration, Ordinary least squares regression.

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