Team

Explosion

Foysal Mahmud Foisal Hossain

ID:KJ-03-00-92 BB-030-00-16

A.K.M Syed Raiyan

BB-030-00-41
Exchange Rate of Indian Rupees and Major
Currencies and relationship between
Purchasing Power Parity(PPP) & Forward
Rate
 The Exchange rate between Indian rupees and major currencies
(2016-2019):

Spot Rate Usa Canada China UK EU

2016 Rs 67.1762980000 Rs 50.7200000000 Rs 9.2800000000 Rs 91.1589960000 Rs 74.3479940000

2017 Rs 65.1221734000 Rs 50.2000000000 Rs 9.6400000000 Rs 83.8624930000 Rs 73.5096450000

2018 Rs 68.3532235800 Rs 52.7600000000 Rs 10.3400000000 Rs 91.1932480000 Rs 80.6943180000

2019 Rs 70.7399160000 Rs 53.2400000000 Rs 10.4800000000 Rs 92.0599233000 Rs 80.3462320000

Absolute Purchasing Power Relative Purchasing Power
Parity Parity

So we focus relative purchasing power parity

Relative purchasing power parity:

Symbolically,
𝑒𝑡 1 + 𝑖𝑑
=
𝑒 1 + 𝑖𝑓
So according to USD,

Rs. should be in 2017

1+0.0675
𝑒𝑡 = 67.176298 ∗ 1+0.0066

=71.2405111

So decision is If ppp held ,the rupee should have depreciated to Rs. 71.2405111.In the market the rupee
suffered less depreciation or simply put appreciation.
This is how all the last 3 years current change rate according to PPP is calculated :

Purchasing Power parity PPP for USA PPP For Canada PPP for China PPP for UK PPP for EU

2016 71.24051074 53.87422886 09.76000000 96.12983130 79.36648360

2017 68.28413030 53.07213930 10.09113300 88.22168199 78.10399781

2018 73.49808987 54.99075713 11.12730964 95.53750038 85.53597708

2019 73.60401992 55.83132743 10.71099185 97.45102551 85.68925643

Forward Rate for 2016-2019

Forward rate of USA Forward rate of Forward rate of Forward rate of UK Forward rate of EU
and India Canada and India China and india and india and india

Rs
Rs 74.3479940000 Rs 71.2405107441 Rs 53.8742288557 Rs 9.7600000000 96.1298313049
Rs
Rs 73.5096450000 Rs 68.2841303045 Rs 53.0721393035 Rs 10.0911330049 88.2216819926
Rs
Rs 80.6943180000 Rs 73.4980898710 Rs 54.9907571288 Rs 11.1273096447 95.5375003756
Rs
Rs 80.3462320000 Rs 73.6040199161 Rs 55.8313274336 Rs 10.7109918543 97.4510255081
 Interest rate differential and Forward premium

Forward Premium vs Interest Differential of USA & INDIA

8.0% 7.5% 7.42%
7.0%
6.1% 6.09%
6.0%
4.9% 4.92%
5.0%
4.0% 4.15%
4.0%

3.0%

2.0%

1.0%

0.0%
2016 2017 2018 2019
interest rate differential of Usa & India

Diagram: Forward Premium vs Interest Differential

of USA & INDIA
 Interest rate differential and Forward premium

forward premimum and interest diffential of Canada and India

7.0%
6.2% 6.25%
6.0% 5.7% 5.75%

4.9% 4.95%
5.0%
4.2% 4.30%

4.0%

3.0%

2.0%

1.0%

0.0%
2016 2017 2018 2019

forward premium canada interest rate differential of canada & India

Diagram: Forward Premium vs Interest

Differential of CANADA & INDIA
 Interest rate differential and Forward premium

Chart Title
8.0% 7.6% 7.50%

7.0%

6.0%
5.2% 5.25%
5.0% 4.7% 4.75%

4.0%

3.0%
2.2% 2.30%
2.0%

1.0%

0.0%
2016 2017 2018 2019

forward premimum of China interest rate differential of chaina & India

Diagram: Forward Premium vs Interest

Differential of CHINA & INDIA
 Interest rate differential and Forward premium

Chart Title
7.0%

5.9% 5.90%
6.0% 5.52%
5.5%
5.2% 5.25%
4.8% 4.82%
5.0%

4.0%

3.0%

2.0%

1.0%

0.0%
2016 2017 2018 2019

forward premimum of uk interest rate differential of uk & India

Diagram: Forward Premium vs Interest

Differential of UK & INDIA
 Interest rate differential and Forward premium

Chart Title
7.0%

6.8% 6.7% 6.75%

6.7% 6.65%
6.6%

6.4%
6.3% 6.25%
6.2%
6.0% 6.00%
6.0%

5.8%

5.6%
2016 2017 2018 2019

forward premimum of EU interest rate differential of EU & India

Diagram: Forward Premium vs Interest

Differential of EURO & INDIA
Credibility :
Thank You