Forex Reserves of India and Forex Management

26. What is the impact of Forex Reserves on a country’s credit rating?
a. Higher Forex Reserves improve the credit rating.
b. Higher Forex Reserves worsen the credit rating.
c. Forex Reserves do not affect the credit rating.
d. Forex Reserves are not considered in the credit rating assessment.

27. Which of the following is a potential risk associated with holding high Forex Reserves?
a. Currency appreciation leading to reduced export competitiveness
b. Currency depreciation leading to inflationary pressures
c. Capital flight and loss of investor confidence
d. All of the above

28. What is the role of the Foreign Exchange Dealers Association of India (FEDAI)?
a. Regulating foreign exchange market operations in India
b. Managing Forex Reserves on behalf of the RBI
c. Monitoring capital flows and exchange rate movements
d. Promoting foreign trade and investment

29. Which of the following is a measure taken by the RBI to manage exchange rate volatility?
a. Open market operations
b. Monetary policy adjustments
c. Intervention in the foreign exchange market
d. All of the above

30. What is the significance of the “Covered Interest Rate Parity” concept in Forex Management?
a. It helps determine the fair value of a currency.
b. It identifies arbitrage opportunities in the foreign exchange market.
c. It assesses the risk associated with foreign exchange transactions.
d. It measures the impact of interest rate differentials on exchange rates.