forex & inflation

7/27/2019 Forex & Inflation

1/11

Increasing Inflation rate and

Forex Reserve

Presented by:Amit khanna

Deepika abichandani

Kirti singh

Nikhil sareen


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Forex Reserve???

Forex reserve or foreign exchange reserve is

the currency of an overseas country that is

purchased by a particular country inexchange for its own currency.

International trade and foreign investment-Two countries


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Sources of Forex Reserve

FDI

FIIs

TOURISM

EXPORTS

VALUATION GAIN BANKING CAPITAL

SHORT TERM CREDIT


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Effects of forex reserve on

currencyIncrease( ) forex reserve appreciation of

rupee

Decrease( ) forex reserve depreciation of

rupee


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Factor for a currency to

depreciate - INFLATION Rise in general level of prices of goods and

services over the period of time

The prices of goods and services is risingand subsequently purchasing power isfalling

Role of central bank

Reduction in value of money


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Measures of inflation

Two main ways to measure inflation

WPI

CPI


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Rate of inflation

The RATE at which the price of everything

goes uprate of inflation

Do not keep money stagnant

Higher rate of return than on rate of inflation


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Current scenario


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Top 10 countries having high

inflation rate1. Zimbabwevery high inflation over 1

million%

2. Burma40%

3. Iran25.3%

4. Vietnam25.2%

5. Egypt21%

6. Pakistan19.27%


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Top 10 countries having high

inflation rate7. Latvia - 17.9%

8. Iraq16%

9. Bulgaria155

10. Qatar14.75%


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Rs. Crore US$ Mn. Rs. Crore US$ Mn. Rs. Crore US$ Mn. Rs. Crore US$ Mn. Rs. Crore US$ Mn.

2 3 4 5 6 7 8 9 10 11

13,33,962 311,790 8,418 691 95,997 2,067 2,48,942 36,474 4,64,021 98,304

(a) Foreign Currency Assets 12,92,470 302,050 8,420 694* 96,447 2,820 2,41,985 35,497 4,52,557 95,936(b) Gold 39,190 9,202 934 837 6,371 874 11,043 2,291

(c) SDRs 47 11 27 8 34 8 41 10

(d) Reserve Position in the IMF** 2,255 527 2 3 511 91 552 95 380 67

For details, please refer to the Current Statistics section of the RBI Bulletin.

** : Reserve Position in the International Monetary Fund (IMF), i.e., Reserve Tranche Position (RTP) which was shown as a memo item

has been included in the reserves from the week ended April 2, 2004 in keeping with the international best practice.

1

Total Reserves

* : Foreign currency assets expressed in US dollar terms include the effect of appreciation/depreciation of non-US currencies (such as

Foreign Exchange Reserves

Variation over

Item Week End-March

2008

End-December

2007

Year

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