Global Factors Affecting Exchange Rates in India

The present paper attempts to investigate long term relationship between movements of Exchange rate and different other macroeconomic global factors vis-à-vis Gold price, Crude oil prices, Foreign Institutional Investment, Standard & Poor's 500 and Foreign Exchange Reserves. The study also seeks to ascertain whether fluctuations in exchange rates are influenced by these variables. For the purpose of study monthly statistical data for Exchange rate (USD/INR), Gold price, Crude oil prices, Foreign Institutional Investment, Standard & Poor's 500 and Foreign Exchange Reserves were used covering the period from April 2005 to March 2013. In order to examine the relationship among these factors Multiple Regression equation model (Galton, 1877) using SPSS has been employed. The results so obtained reveal high correlation among the variables and suggests that all the external factors used under the study i.e. Gold price, Crude oil price, FII, S&P 500 & Foreign and Exchange Reserves significantly affect the value Indian Rupee against US dollar.