Academic literature on the topic 'Rupee/dollar exchange'

Through this study, we attempt to understand the dynamics of Indian Rupee fluctuations against US Dollar that have been caused by the fluctuations in the Fed Rate. We tried to understand how the Fed Rate influence the Indian rupee - US Dollar exchange rate movements. After research work done via secondary method, we have observed that factors like differential interest rate, differential inflation rate, differential money supply in both the markets, differential output growth rate of both the countries, among others, are important factors which impact the fluctuation in the fed rate that accounts for approximately 91% variance of the Dollar-Rupee exchange rates and explain the exchange rate dynamics to a large extent. A few factors that were earlier considered to be important are not as significant as expected.

Purpose The purpose of this paper is to ascertain the pattern of the implied volatility function for currency options traded on the National Stock Exchange of India (NSE), identify its potential determinants and to investigate any seasonality in the pattern. Design/methodology/approach The paper examines four different specifications for the implied volatility smile of exchange-traded dollar-rupee options. These specifications are tested by running Ordinary Least Squares (OLS) regressions on a daily basis for all options over the entire sample period. Seven potential determinants for the shape of the volatility function are identified. Contemporaneous and lead-lag relationships between these determinants and the shape of the volatility function are examined using OLS and multivariate VAR. Impulse response functions are employed to test the strength and persistence of the lead-lag relations. Seasonality of the smile pattern is tested using OLS. Findings The study shows that the implied volatility function for dollar-rupee options is asymmetric and varies with the time to maturity of the option. Historical volatility, momentum and jumps in the exchange rate, time to maturity, traded volume of options and volatility in the stock market appear to Granger-cause the shape of the volatility smile. Feedback causality is observed from the shape of the smile to the volatility, momentum and jumps in the exchange rate and trading volume of currency options. A weak day-of-the-week effect is observed in the pattern of the volatility smile. Practical implications The study sheds light on the potential determinants of the smile and highlights the predictive power of the smile which findings can be useful to market practitioners for pricing and hedging of dollar-rupee options. The study has strong practical implications during a period of increased volatility in the dollar-rupee pair. Originality/value Most of the existing literature regarding implied volatility smiles has focused either on the volatility smile of US equity index options or that of major liquid currencies. There is a need for such studies in the context of options on emerging market currencies such as the Indian rupee which are characterized by thin trading and frequent central bank intervention and signaling. To the best of the author’s knowledge this study is the first to focus on the volatility smile of exchange-traded options on the US dollar–Indian rupee.

This study re-examines the long run validity of the monetary approach to exchange rate determination for India. In particular, the long run association of bilateral nominal exchange rate of Indian rupee vis-?-vis USD, Pound-sterling, Yen and Euro against the corresponding monetary fundamentals that the model underlines has been tested using Johansen-Juselius maximum likelihood framework and Gregory-Hansen co-integration approach. Irrespective of the exchange rates the study finds a co-integrating relationship among the variables using Johansen-Juselius maximum likelihood approach. The Gregory-Hansen co-integration method allows for one break determined endogenously in three specifications also confirms the long run relationship. Our results, hence, suggest that the monetary model is a valid theory of long run equilibrium condition for the rupee-dollar, rupee-pound, rupee-yen and rupee-euro exchange rates.

This paper analyzes the impact of exchange market forces on Pak-Rupee/US dollar exchange rates during the 1965-1971 globalization period. The main findings are that a) the behavior of Pakistan’s fundamentals relative to those of the USA help to explain exchange market forces against the Pak-Rupee; b) during the run up to devaluation in the globalization period the monetary authorities in Pakistan were acting to reduce domestic credit; but that c) additional pressure was brought against the Pak-Rupee from speculative sources. These findings relate to current thinking on the choice of the exchange rate regime as even well behaved fundamentals may not be sufficient to sustain a currency on its peg.