In our paper, we will choose Indian Rupee (INR) as a foreign currency of our choice of discussion. According to the requirement of the topic, first of all, we will try to project the trend of movement of Indian Rupee against US Dollar (US$) for the time period of 2005 – 2010 in figure: 1 below: Figure: 1
From figure: 1, it is evident that within the time period of 5 years (2005 – 2010), the Indian Rupee hovered in the range between 44 (approximately) to 46 against the US Dollar displaying its maximum appreciation in value in the first quarter of 2008 when the US economy was suffering from its worst phase of recession triggered by the ‘bubble – bust’ in the housing sector due to sub – prime crisis. However, the first two quarters of 2009 observed the steady appreciation of US Dollar against Indian Rupee again followed by gradual declines and finally stabilizing around the nominal exchange rate of 1 US Dollar = 46 Indian Rupees by the end of 2010.
Hence it is evident that within the time span of 5 years (2005 – 2010), the Indian Rupee depreciated by approximately 4.5 percent against the US Dollar although the Indian economy fared quite well compared to the US and major European economies in terms of economic growth in the era of severe global recession. This apparent contradiction may be defined primarily by the reason that the then Indian government failed to implement some key reforms which were strongly advocated by the World Bank, IMF and other
References: http://www.tradingeconomics.com/india/currency http://www.tradingeconomics.com/india/exports