Dollar-Rupee relation amidst current financial crisis

A really nice and informative post that I found here. Must read for anyone who is worried about the current global situation.

 

About ‘Exchange Rate’ of a currency:

The exchange rate of the currency of a country in relation to the currency of another country depends on the comparative trade advantages and economic strengths of the countries. If one US dollar is equal to 45 rupees, it simply means that in the US, if a dollar fetches 45 oranges while in India, a rupee would fetch only one orange of equivalent size and quality.

Just like any other commodity, the currency of any economy is based on dynamics of supply and demand, and its value depends on trading in currency exchanges all over the world. Higher the demand for a currency on an exchange, the stronger it becomes and vice versa. However, for currencies like INR which are not traded on exchanges, the value depends on capital inflows in the country.

Appreciation & Depreciation of currency:

A currency appreciates means its value has increased in relation to another currency. A currency depreciates means its value has decreased in relation to another currency. Eg. If 1 $ costs Rs 45 and if it now costs Rs 44, this means rupee has appreciated in its value (i.e. instead of Rs 45 you will get 1 $ in Rs 44, this also means the dollar has weakened). Similarly, if 1 $ costs Rs 45 and if it now costs Rs 46, this means rupee has depreciated in its value (i.e. instead of Rs 45 you will get 1 $ in Rs 46, this also means the dollar has strengthened).

Why do currency values fluctuate?

There are many participants in any foreign exchange market. These entities — like banks, corporations, brokers, even individuals — buy and sell currencies everyday. Here too the universal economic law of demand and supply is applicable: when there are more buyers for a currency than sellers, its exchange rate rises. Similarly, when there are more sellers of a particular currency than buyers, its exchange rate will fall. This does not mean people no longer want money; it only means that people prefer to keep their wealth in some other form or another currency.

0 rupee currency – to eliminate corruption

I first saw this here and then found out more about it here and here. Really interesting! Worth the time. Do read it!!!!

CHENNAI: Next time when you are asked to cough up extra money to get a driving licence or a birth certificate, shock the bribe-seekers with a ‘zero rupee’ note.

This is a novel campaign launched by ’5th Pillar,’ a non-profit non-governmental organisation formed to fight the common enemy of the nation — corruption.

The ‘zero rupee’ note, which resembles an original thousand rupees note, is a sign of unwillingness to bribe. It has the picture of Mahatma Gandhi on it with a pledge “I promise to neither accept nor give bribe” printed both in English and Tamil. It also resolves to ‘eliminate corruption at all levels.’

The rupee note has also been printed in Hindi and other regional languages to take up the campaign against corruption at the national level.

Founded recently by noted environmentalist and Exnora founder M B Nirmal, the NGO seeks to reduce the scale of corruption problem in the country by fostering attitudinal change among citizens and advocating the use of Right to Information (RTI) Act to ensure transparency in all governmental organisations.