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Fluctuation in Forex rate.

Who gains and who losses


Keyword - Forex rate
Fluctuations in the forex rate are a common phenomenon and it occurs everyday.
Therefore the investors and the companies need to guard themselves. In case of
fluctuations there can be two cases either the currency will appreciate or it will
depreciate.
Affect of Currency Appreciation
Lets take the example of US dollar vs INR. The current scenario signifies that the US
dollar has become more expensive as compared to the Indian rupee. In another words the
appreciation of US dollar has taken place. Earlier 1 unit of US $ used to fetch 52 rupee
but now with 1$ is equivalent to RS58. This will bring about a change in the import and
export segment. The US exporter will gain more because the payment will be made to US
by converting the currency to US dollar. Hence the same amount of US dollar will be
able to get more of the Indian rupees. Goods which are exported will be cheaper and the
people of the country will be benefited. Those who are tourist from India will have to pay
more in US because the rupee has depreciated in terms of US dollar. Therefore the Indian
tourist has to pay more because the same unit of US dollar can be acquired by more of
Indian rupees.
In case of US import the US importer will loose because when the import is done the US
importer will be required to pay in Indian rupees. As the Indian rupees have depreciated
against the US dollar hence the import will be required to be paid in terms of Indian
rupees which is Rs 58. The Indian exporter will gain while the US importer will loose.
Hence the fluctuation brings a change in the forex rate.
Affect of Currency Depreciation
Taking the example of US dollar vs the Indian rupees if the 1 USD = 58 and it fell to Rs
52 it means that the change in the forex rate has caused a decrease in the value of the US
dollar. Previously USD used to fetch RS 58 but now it has declined to Rs 52. In this case
more US dollar will be required to have Indian rupees.
This implies that the Indian import will be cheaper because the payment to be made in
US dollar by converting the INR will be less. Previously RS 58was required to be paid
and now Rs 54 this means that Indian importers will be benefited. On the contrary the
Indian exporters will loose because the payment from US will be less as compared to
previous payment.
Hence it is seen that the fluctuations in the forex rate tends to increase or decrease the
value of a currency and ultimately affects the trade. Mainly the export and import is
affected.

Changes in forex rate are a common occurrence and happen due to the volatility in the
market. Due to this one countrys trade gain and the other country loose.