IAI Actuarial Core Principles · Business Economics · Impact of macroeconomic policies on businesses
Which development would, other things equal, most directly put upward pressure on the external value of the rupee?
Higher Indian interest rates attracting foreign portfolio inflows. Foreign investors must buy rupees to invest, raising demand for the currency and its value, while the other developments increase rupee supply or reduce foreign demand for it.
- AHigher Indian interest rates attracting foreign portfolio inflowsCorrect
- BA widening current account deficit financed by reserves
- CRising Indian inflation relative to trading partners
- DForeign investors selling Indian equities
- Falling export demand from abroad
Explanation
Higher interest rates attract foreign capital, increasing demand for rupees and raising its value. The other options raise supply of rupees or reduce demand for them.
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