Foreign Exchange Market In India
India has emerged as a key player in the world economy. Today the country has left behind its socialistic development model and emerged as a country with free market and opportunities for everyone who wants to come and have a piece of the pie. The foreign exchange market in India is also an important aspect of the overall development of the country.
It was in August 1994, that the Indian Rupee was made convertible on a trade account. The capital inflow which was enhanced greatly due to the liberalization of investment rules means that Indian Rupee has been able to maintain a respectable amount in comparison to US Dollar. The rupee has been very stable since the August 1992 and moved at higher and lower prices but has never fallen extremely weak in comparison to the dollar.
The Indian market has been able to maintain a lot of liquidity thanks to the efforts of Reserve Bank of India. The Reserve Bank of India has stepped in the market, time and again to act as a buyer of last resort and saved the face of the Rupee. Similarly, the rupee has always been in enough supply to satisfy the demand of foreign exchange market with considerable ease. It is possible to buy as much as 100 million USD and selling rupee never was a problem since the Reserve Bank is always ready to buy.
The foreign exchange market in India has been very liquid. Advance quotes up to six months are available with exceptional ease. Ever since 1993, the number of one year long deals have also gained attention of a number of foreign exchange traders, buying for the long terms. While the Reserve Bank of India allows the trading banks to make US dollar transactions, the other currencies have still not been floating as freely in the market. The restriction has its own drawbacks even though it aids in the maintenance of foreign currency reserves in the country. There is no long term market of Indian rupee and whatever long term buyers are purchasing, is still too small and at a very early stage. The result is that the transactions of foreign exchange as well as interest rates on investment rates still needs some more strengthening. The condition has gradually started to strengthen itself. The foreign exchange market in India is still on a way to improve its strength. The liberalization of foreign exchange related transactions as well as the laws which regulate foreign exchange market in India has led to the gradual improvement of the India's foreign exchange market..Within two decades of opening up of Indian economy, the foreign exchange market in India has carved a niche for itself and is now looking to take on the stronger commodities in the foreign exchange market.
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