ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sell US$
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Sell bonds
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Buy bonds
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Buy US$
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Detailed explanation-1: -In order to prevent appreciation of the rupee against the US $, the RBI will Buy US $ Step-by-step explanation: Rates are being appreciated when something is in demand.
Detailed explanation-2: -RBI has to intervene to stop the sharp depreciation. Below are some ways RBI can stop the rupee depreciation: Sell forex reserves: RBI can sell (it is already doing it) a part of its foreign forex reserves to control the falling rupee. In 2021, India’s foreign exchange reserves stood at $642 billion.
Detailed explanation-3: -The RBI has to consider financial market conditions, impact of imported inflation and the acute shortage of US dollars (USD and/or $) in the market and accordingly decide to sell US dollars to keep the Indian Rupee (INR and/or Rs) from depreciating sharply.
Detailed explanation-4: -The RBI sells dollars from its foreign exchange reserves in order to prevent excessive volatility in the rupee. So far this year, the rupee has depreciated 10.17 per cent against the US dollar.
Detailed explanation-5: -Allowing foreign central banks, sovereign wealth funds, and endowment funds to invest in government bonds. Increasing the cap on foreign investment. The RBI has the option to sell some of its foreign currency reserves in order to manage the weakening rupee, and it is already doing so. More items •17-Jan-2023