Topics
CISCE: Class 12
Key Points: Factors or Determinants of Foreign Exchange Rate
- Trade conditions: More exports → currency strengthens; more imports → currency weakens.
- Capital movements: Foreign investment inflow raises demand for home currency.
- Bank rate: Higher bank rate attracts foreign capital and strengthens currency.
- Inflation: Higher inflation reduces currency value in foreign markets.
- Government policies: Exchange control and protection affect demand for foreign currency.
- Political stability: Peace and security attract foreign capital and strengthen currency.
