The rupee is emerging strong, by closing strong at 44.91/92 per dollar. What might be the reason for this? As we all know the fall of the dollar against euro might be one of the reasons for this, also other factors attributable to the strengthening of the rupee might be trade activities.
What can be the result of such strengthening of the currency in the long run? As discussed in an earlier article, with the increase in the value of the rupee (in the long run), the purchasing power parity increases thereby leading to more demand and hence more supply. This in turn fuels a chain reaction of increased productivity and trade, but one must bear in mind that a structural development of the economy as well as the international environment (in terms of trade activities and demand for Indian goods) plays a major role in strengthening the economy as well as the rupee.