Dibrugarh University, Dibrugarh, Assam, India.
Exchangerate volatility is the fluctuation in the rate of change of domestic currency
with respect to the other foreign currency. The depreciation of Indian currency is
becoming a burning concern for the country. Foreign exchange is one of the most
important term used in any developed or developing countries to measure the
economic health. Devaluing the domestic currency lowers the trade balance
impacting the balance of payment. The major objective of this paper is to
investigate the macro variable factors affecting the exchange rate with respect to
USD for a period of thirty years. The paper employs time series analysis to test the
relationship and long run and short run causality among GDP, inflation, foreign
exchange reserve, interest rate and foreign exchange rate. The result depicts that
GDP and Inflation are directly related to foreign exchange rate whereas foreign
exchange reserve and interest rate is inversely related to the Foreign exchange rate.