INTRODUCTION
- Each day we get fascinating news about currency which fuel our curiosity, such as Rupee gains 12 paise against US dollar, Dollar Spot/Forward Rates plummet, Rupee down, Euro holds steady, Pound strengthens etc.
- Ever wondered what these and other jargons mean? We shall try to understand a few fundamentals related to currency transactions in this unit.In chapter 3, we examined the demand for and supply of domestic currency. It is not domestic currency alone that we need. Households, businesses and governments in India.
- for example, buy different types of goods and services produced in other countries. Similarly, residents of the rest of the world buy goods and services from residents in India. Foreign investors, businesses, and governments invest in our country, just as our nationals invest in other countries.
- In the same way, lending, and borrowing also take place internationally. These and similar other transactions give rise to an international dimension of money, which involves exchange of one currency for another.
- Obviously, this entails market transactions involving determination of price of one currency in terms of another.
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