how does rupee strengthen when the Reserve Bank of India
sells dollars in the market????

please i need an answer




Answers were Sorted based on User's Feedback



how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / raj aryan

when RBI sells dollars in the market, it receives rupee in
return. This transaction has two effects in international
mkt
1. quantity of rupee decreases (demand increases)
2. quantity of dollar increases (supply increases)
by demand-supply theory, rupee strengthens and dollar
weakens.

Is This Answer Correct ?    30 Yes 0 No

how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / neha

When RBI sells dollar the buyer has to pay in rupees which
leads to the increase in demand of maoney which leads to the
rupee appreciation.

Is This Answer Correct ?    30 Yes 4 No

how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / jyotirman

as the RBI sells dollars ,the supply of dollar increases
.and as the price depends upon demand and supply the price
of dollar wrt rupee will tend to decrease due to higher
supply that essentially means strenthening of the rupee.

Is This Answer Correct ?    31 Yes 7 No




how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / bloody idiot

When RBI Sells Dollars in the market
1) Rupees is bought by RBI so supply of Rupees in Market
Decreases and price per US $ remaining the same the demand
for Rupees will increase naturally.
2) Now less Rupees is available for buying US $ in
International Market.
3) In Reverse Supply of US $ to Market in the Exchange
Market increases due to sell by RBI and Hence $ is
available in more supply as compared to pre-sale position.
4) The combined effect of More $ and less Re. results
increase in price of Re. as compared to US $ and there is
overall pressure on the Mkt. to sell $ / Buy Re. in order
to reach Market Equillibrium.
5) Thus it is the forces of Demand and Supply for Foreign
Exchange that determines the position of Rupee in Market.

This policy of RBI is criticised by many in the past, some
of the reasons were
1) Many feel that it deplets Country's Foreign Exchange
Reserves unnecesarrily.
2) Many feel that a Exchange Rate in an Open FE Maket
should be deecided by forces of Demands and supplies in the
market and RBI selling acts as artificial
infusion/injection effect to disturb this process (one org.
tries to determine prics)

Is This Answer Correct ?    14 Yes 0 No

how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / venu

IN MONEY MARKET ONE OF THE DETERMINANT OF VALUE OF CURRENCY IS "SUPPLY AND DEMAND". WE ALL KNOW THAT WHEN DEMAND IS MORE ITS VALUE WILL GO HIGH, ON THE OTHER HAND IF SUPPLY IS MORE THAN DEMAND THEN ITS VALUE GOES DOWN.

THE SAME PRINCIPLE CAN APPLY IN THIS CASE. BY SELLING DOLLAR RBI PUMPS DOLLAR CURRENCY IN TO MARKET WHILE AT THE SAME TIME IT BUYS BACK RUPEE(BY SELLING DOLOR)THIS ACTIVITY CREATES MORE DEMAND FOR RUPEE.... BECAUSE OF THESE EFFECTS WE CAN OBSERVE CHANGES IN DOLLAR VS RUPEE VALUE....

Is This Answer Correct ?    11 Yes 0 No

how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / mayankgupta

when rbi sells doller supply of doller increase thus demand
of rupees increase becouse people buy doller with ruppes
hence rupee appriceate in respect to doller

mayank 9871564172

Is This Answer Correct ?    5 Yes 2 No

how does rupee strengthen when the Reserve Bank of India sells dollars in the market???? please ..

Answer / vijay

When RBI sells dollar the buyer has to pay in rupees which
leads to the increase in demand of maoney which in turns leads to the rupee depriciation

Is This Answer Correct ?    0 Yes 0 No

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