Q. In India, the dollar-rupee exchange rate depends upon:
Government Control
Demand-supply balance
RBI’s Monetary policy
Choose the correct options:
Answer: Only 2
Notes:
- Government Control: The government or RBI do attempt to intervene at times to curb volatility, but market forces eventually determine the currency devaluation or appreciation.
- Demand-Supply balance: The core exchange rate in India is market-determined based on demand and supply dynamics of the US Dollar and Indian Rupee.
- RBI's Monetary Policy: While interest rates can incentivize inflows, ultimately the currency rate equilibrium depends largely on foreign exchange demand and local currency liquidity.
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