I am from India and my question is related to conditions based in India which may be applicable to other countries as well.
Dollar value is gradually rising in India. I was trying to understand why. During this COVID season I was expecting the Dollar value to go down base on my below reasons and it didn't happen. I read about a little bit about it and trying to make connection between the below points to understand why.
India's usual major expense for Dollar in large scale
- Crude oil purchase and Defense purchase expense.
India's Rupee(currency) gain
- Huge remittance from US and middle east countries
- India's forex reserve increase because of increase in foreign remittance
- Crude oil prices were down before a few months due to COVID
- India's IT service sector performance was excellent and got many US deals worth billions.
What perplexing me are
- How can the foreign reserve go high without reducing Dollar exchange rates? The country holding more Dollars and still the exchange rate is high.
- When the main expense of Crude oil purchase was down(also demand was down) why didn't it affect the exchange rate?