4. Introduction
Currency or money is the most crucial elements of
economic science. Properly operated, monetary system
is the life blood of the circular flows of income and
expenditure. On the other hand a malfunctioning
monetary system will lead to serve fluctuations in the
economy’s level of output, employment and prices.
Currency which is chosen for this assignment is INR or
Indian national rupees.
5. Fundamental Analysis
To understand the market movements, fundamental
analysis plays an important role of learning the market
trends. In the short term, the results do not always go
along with the fundamental analysis. But in the long
term, currencies always move along with this analysis.
This analysis will serve you to interpret the reasons
behind movements.
6. Economic Indicator
An economic indicator represents financial data of the
economy. It depicts the trends of economic activities
which influence currency’s value. Some economic
indicators of country are
7. Gross Domestic Product
GDP is defined as the monetary value of all the goods
and services produced by an economy over a specified
period generally a year. It influences the level of
employment, the level of output and people’s standard
of living. This statistics provide important background
information on which the government can base its
decisions.
8. Inflation
Inflation is defined as an increment in general level of
prices of consumer goods and services for a period of
time. Wholesale Price Index (WPI) and Consumer Price
Index (CPI) are two indices which represent the rate of
inflation. The inflation rate means the rate of change of
the either indices. The rate of inflation indicates the rate
at which purchasing power of money is being eroded.
9. Production
It is a common practice to divide the totality of
economic activities into three broad groups viz
‘Agriculture and related activities’, ‘Industry’ and
‘Service’. Changes in industrial production are reported
in the form of changes in an index number called Index
of Industrial Production (IIP). This is a representative
figure which measures industrial marketing activities in
the economy.
10. Imports and Exports
Import – a good or service consumed in one country
which has been bought from another country. If imports
go down then the supply of local currency will decrease
and hence, increase the value of domestic currency.
Export – an economy produces a good or service and
sells to another economy which is the actual consumer
of that good or service.
11. Employment
The rate of unemployment is simply the fraction or
percentage of workforce that has no gainful
employment. This is a key economic indicator. If a
country has high unemployment rate that means that
country’s economy is not able to provide jobs for living.
12. Business Cycle
Economic growth is not a continuous process.
Upswings and downswings are of varying duration and
intensity and are referred to as ‘cycles’. Government
attempts to smooth out these fluctuations with the use of
monetary and fiscal policies.
13. Political Environment
Recently, India got third position on corruption rating
which impact a bad impression on foreign investors.
Corruption scandals have reinforced a negative
perception on the rest of the world. It directly affects its
import and exports and confidence of foreign investors,
which leads to depreciation in value of currency.
14. Technical Analysis
Technical analysis is a form of market analysis that
studies demand and supply for currencies based on
trading volume and price studies. Using charts and
modeling techniques, technicians attempt to identify the
price trends in a market. Technical analysis studies the
past price history and makes future prediction for
exchange rate. It uses many different methods and
forms to calculate future exchange rates.