The Reserve Bank of India (RBI) has cautioned banks and customers again about unauthorised entities offering foreign exchange trading using the banking channels.
About Forex
Foreign exchange (Forex) refers to exchanging the currency of one country for another at prevailing exchange rates
Foreign Exchange Rate is the price of one currency in terms of another.
It links the currencies of different countries and enables comparison of international costs and prices
Need: People demand foreign exchange because: they want to purchase goods and services from other countries; they want to send gifts abroad; and they want to purchase financial assets of a certain country.
A rise in the price of foreign exchange will increase the cost (in terms of rupees) of purchasing a foreign good.
This reduces demand for imports and hence demand for foreign exchange also decreases, other things remaining constant.
