What Drives Forward Premia in Indian Forex Market?

Anil Kumar Sharma and Anujit Mitra

Working Papers from eSocialSciences

Abstract: This paper explores the behaviour of the forward premia for US$ vis-Ã -vis INR during the five-year period of September 2000 to September 2005. Indian forex market experienced a peculiar phenomenon in the years 2003 and 2004 where the forward premia on US$ spot (cash) vis-Ã -vis Indian rupee became negative. This phenomenon was somewhat uncommon to Indian forex market wherein Indian rupee was always at discount to US$ in the past. The paper tests hypothesis of uncovered interest rate parity in the context of Indian market. [RBI Occasional Papers, 2006]

Keywords: forward premia; uncovered interest rate parity; forex; foreign exchange rate; US dollar; Internatioanal Economic Relations; Economics (search for similar items in EconPapers)
Date: 2007-01
Note: Institutional Papers
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