Foreign Exchange Rate

Grade XII
 Foreign Exchange Rate
• The Rate at which currencies of different
countries are traded or exchanged is called
Exchange Rate.
• 1US Dollar = 75 INR
• 1 Japanese Yen = 0.7 INR
• 1 Saudi Riyal = 20.03 INR
 Demand for Foreign Exchange

• Who all will require/ demand/want Foreign

Exchange?
 Demand for Foreign Exchange
• Importers of goods and services for making
payments abroad
• Tourists who want visit other countries
• Purchasing assets abroad
• Traders for Speculation
 Demand for Foreign Exchange
• What will happen to demand of foreign
currency if exchange rate rises?
(1USD=70 INR--- 1USD =75 INR)

• What will happen to demand of foreign

currency if exchange rate falls?
• (1USD=70 INR--- 1USD =65 INR)
 Demand for Foreign Exchange
• There exists an inverse relationship between demand for
foreign exchange and the foreign exchange rate. This causes
the demand curve for foreign exchange slope downwards.
• X- axis -Demand & supply of Dollars; Y-axis – Price of Dollars in
terms of Rs.
Exchange Rate (Rs/Dollar)

Quantity of USD
 Supply of Foreign Exchange

• Who all will be able to bring Foreign Exchange

in a country ?
 Supply of Foreign Exchange
• Exporters who sell goods and services abroad.
• Investment done by foreigners in the domestic
country.
• Remittances received
• Speculators who want to make profit by
selling foreign exchange.
 Supply of Foreign Exchange
• What will happen to supply of foreign
currency if exchange rate rises?
• (1USD=70 INR--- 1USD =75 INR)

• What will happen to supply of foreign

currency if exchange rate falls?
• (1USD=70 INR--- 1USD = 65 INR)
 Supply of Foreign Exchange
• There exists a positive or direct relationship between supply
of foreign exchange and the foreign exchange rate. This
causes the supply curve for foreign exchange slope upwards.
• X- axis -Demand & supply of Dollars; Y-axis – Price of Dollars in
terms of Rs.
• Exchange rate
• Rs./Dollar

Demand and supply of Dollars