High interest rates in India attract foreign investors to earn high returns for their savings which increases demand & value of the Rupee against AUD and vice versa. Presently the cash rates are 8.5% and 2.25% for Reserve Bank of India and Reserve Bank of Australia respectively.
- Inflation
Inflation is general price rise over a period of time. A prices rise will buy you less i.e. it erodes the value of money over time. Presently India is facing high inflation of about 5.5% to 8.5% which decreases the demand for Rupees. And Australia facing relatively low inflation approx to 1.3% creates safer option to invest for the investor and increases demand for the AUD but the Rupee falls. Investors’ confidence changes with political stability affecting the price of currency which causes the decrease in value of the Indian currency against the AUD.
- Balance of Payment
Rise in exports for a foreign country appreciates the value of currency of the country. If we import from Australia the payment has to be done in Australian dollars which increases the value and demand for AUD. And opposite is the case with increase in imports i.e. it will devalue the local currency. And this difference between the imports and exports for the country is termed as Balance of Payment. If the imports are greater than exports then, local currency will fall and vice versa.
India and Australia are negotiating a free trade deal that would allow goods to flow freely between the two countries without additional taxes, tariffs or import quotas. This would help in balancing import/export imbalances. As a result, the currency is anticipated to be more stable.
(Source: Orbitremit)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
