Indian Rupee

According to the report, the Indian rupee appreciated by 0.2 per cent in March (up to March 14) after depreciating by 0.9 per cent in February. Compared to other currencies, the Indian rupee has remained an underperformer. In fact, when compared with a median appreciation of 1 per cent in the sample of 18 currencies, the rupee was way behind other currencies in the pack, the report said.

The rupee had closed at just over Rs 81 on Friday. On Monday, the Indian currency opened at Rs 80.92 at the interbank foreign exchange market and went down further to change hands at Rs 81.39 against a dollar. According to forex dealers, the Reserve Bank of India and public sector oil companies stepped in to stem the fall.

Besides cash-starved Sri Lanka is also likely to start using the Indian currency for bilateral trade.An analyst working for an industry body noted that as many countries look at setting up alternative supply chains in India, there is an "openness in accepting the rupee trade."

The Ministry of Finance, in an affidavit, said: "The withdrawal of legal tender character of a significant portion of total currency value was a well-considered decision. It was taken after extensive consultation with the RBI and advance preparations". It further added that demonetisation was also a part of larger strategy for combating the menace of fake money, terror financing, black money and tax evasion.

Shaktikanta Das, while addressing industry body FICCI's banking summit in Mumbai, said that capital flows will resume as the US Federal Reserve will not resort to tightening of rates for a long time. The RBI Governor's comments on the rupee came just hours before the US Fed is scheduled to meet later in the day to review key rates.

The exchange rate of currencies is constantly fluctuating because most countries have flexible exchange systems where the exchange rate is determined by different factors. A question that most people have in their minds is why the value of the Indian rupee or any other currency fluctuates?