Foreign Exchange


 
 
Concept Explanation
 

Foreign Exchange

Foreign exchange reserves are an important component of the BoP and an essential element in the analysis of an economy's external position.

India's Balance of Payments and Foreign Trade.

India's foreign exchange reserves comprise Foreign Currency Assets (FCAs), gold, Special Drawing Rights (SDRs) and Reserve Tranche Position (RTF) in the International Monetary Fund (IMF).

Exchange Rate

  • Exchange Rate is the rate, at which Indian rupee will be exchanged with other international currencies, say US dollar, in the foreign exchange market.
  • NEER AND REER

    The Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) indices are used as indicators of .external competitiveness of the country over a period of time/NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies, while REER is defined as a weighted average of nominal exchange rates, adjusted for home and foreign country relative price differentials.

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