An Empirical Analysis of the Relationship between Currency Futures Andcurrency Exchange Rate, Economical Formulas, Prediction Models and Volatility in India with Reference to US Dollar, Great Britain Poundand Euro Currency

One of the world's largest financial markets is the “global foreign exchange market,” with average daily trades in trillions of dollars. The forex market is the backbone of international trade, global investing, and is critical to support imports and exports. The exchange rate is one of the most important determinants of a country's relative economic health level. It is among the most-watched, analyzed, and governmentally manipulated economic measures since it impacts overall international trade. This study was aimed at identifying the important factors affecting the valuation of the currency. The first approach was performing correlation analysis using historical data for 10 years between 2007 and 2016. The second was factor analysis using a data set of 100 bank professional’s responses using a survey towards the valuation of currencies. The correlation analysis's key findings are that money supply, Sensex, exports/imports, and business confidence index are the main factors affecting the major currencies exchange rate. With the help of factor analysis, it can be concluded that trade, domestic rates, and remittances determine the price of the domestic currency. Finally, the main factors that best predict the rupee's appreciation or depreciation are the domestic indexes, investment inflow, and money surplus. Therefore, it is recommended that by keeping some of these factors strong, we will have a healthy foreign exchange market, which in turn leads to a profitable economy