Dynamics of currency exchange rates co-movements and volatility: Indian rupee against major trading currencies
Mahesh Kumar et al.
What the paper says
Type of the article: Research ArticleAbstractForeign exchange markets have intrigued not only corporations engaged in export and import, but also individuals and other entities seeking to achieve decent risk-adjusted returns and protect themselves from future currency exchange rate exposure. Hence, researchers are drawn to examine the volatility of returns and identify diversification and hedging opportunities to mitigate country and financial risks of the five largest trading currencies with respect to the Indian currency, the rupee. The study used historical daily exchange rate data for the Indian currency with respect to American dollar, euro, British pound, Japanese yen, and Australian dollar, spanning from January 1, 2008 to December 31, 2025.American dollar has the highest average daily return among the five currencies, followed closely by euro and pound. Pound exhibits the highest standard deviation, and its volatility suggests greater uncertainty for investors dealing in these transactions. High correlations between dollar-euro and euro-pound indicate that they are influenced by similar economic factors or market sentiments. Frequent structural breaks highlight the possibility for currency exchange rates to shift dramatically due to unforeseen events. This is a crucial insight for risk management, as it signals the need for dynamic hedging strategies that can adapt to sudden changes in market conditions. Investors and policymakers can leverage these findings to optimize currency portfolios and reduce financial risk, especially when seeking diversification benefits and long-term stability amidst global market shifts.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.