Important Points for IC 99 - Asset Management Exam
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When investing in foreign countries or financial assets of those countries, the currency exchange rate becomes a subject matter of special consideration because the change in exchange rate can change the price of the asset or the rate of return on that asset. Such foreign exchange risk applies to all financial assets or instruments that are in a currency other than in domestic currency.
When Indian rupee depreciates against the US Dollar, it indicates that demand for US Dollar is more than its supply.
The forex market in India is regulated by the Reserve Bank of India (RBI) because it has the statutory powers and responsibility to administer foreign exchange.
The modern techniques of management are applied to the spectrum of management of foreign currencies. One of the techniques applied here includes control of forex. Control of forex refers to creation of forex reserves.
At the national level, forex storage is done through forex reserves which are held in the form of gold, Special Drawing Rights (SDRs) and foreign currencies. The SDRs are issued by International Monetary Fund (IMF).
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