I have three currency pairs - USDEUR - 0.88, USDINR - 67.13 and EURINR - 75.88 , so simple math tells me that EURINR should be USDINR/USDEUR = 76.28 ...this is a fairly significant deviation from an exact conversion and i am sure i am forgetting something basic here.
Take the yen now and when i do a similar calculation USDJPY - 100.21 and USDINR - 67.13 and JPYINR - 0.67 ..result of USDINR/USDJPY gives me 0.6698 which is extremely close to the exchange rate.
a) what explains the difference in the first case? Is it because the factors impacting exchange rate between the pairs of countries are different ? (for e.g. US invests a lot more in India than Europe as a whole hence INR should be very reactive to changes in USD but not so for EUR ? )
b) How come there's a difference in the two cases shown? JPY seems to fit the equation rather nicely.
Apologies if this sounds confusing, I regret not paying attention to these classes in B school :(