COMPARATIVE ANALYSIS OF CHANGES IN CURRENCY RATES

Jurabekov Farrukh

The article analyzes the monthly change in the rates of national currencies — Indian rupee and Uzbek soum for 2016-2018, which made it possible to draw conclusions about the correlation of the change, the stability of monetary units and to predict changes in the exchange rate of the Uzbek soum.

В статье анализировано ежемесячное изменение курсов национальных валют — Индийской рупии и Узбекского сума за 2016-2018 годы, что позволило сделать выводы о корреляционной связи изменения, стабильности денежных единиц и прогнозировать  изменения курса Узбекского сума.

 Introduction

It is well known from history that each state introduced its own currency for commodity-money circulation within the territory of the country. This brought income to the treasury of the state (in the form of Seenirage) on the one hand, and on the other, it facilitated the exchange of goods between the producer and the buyer through money.

When selling and buying goods between neighboring countries, it took a certain equivalent of the exchange of national monetary units, which contributed to the formation of the exchange rate. The rate of the national currency grew (strengthened) with an increase in demand for goods for export, weakened with an increase in supply or a decrease in external demand.

At the present stage of development of the world economy, many factors affect the changes in the exchange rate, which are characteristic only of the modern world: political instability, the global financial crisis or instability in commodity markets and others.

At the modern stage of economic development, the study of changes in the exchange rate is an important aspect of the dynamics of the development of the domestic economy, the study of which reveals the causes of the negative and positive effects of price changes, the balance of foreign trade and other factors.

In this regard, the analysis of changes in the national currency to other currencies is relevant, which served as the basis for this study.

The main part

  1. To analyze the dynamics of changes in the exchange rate, we selected the monetary units of the Indian rupee and the Uzbek sum. To compare the changes in the exchange rate of Indian rupee and Uzbek soum to a more solid currency, we chose the US dollar, since we were available on the official websites of the Reserve Bank of India (Reserve Bank of India) and the Central Bank of Uzbekistan
  2. When preparing the data for the construction of the table, we selected the date of the course change, the last day of each month, from January 1, 2016 to September 30, 2018 in order to make the values comparable.
  3. On the basis of the materials studied for the course “International finance” we have built a table where the following indicators are calculated:
  4. a) Dynamics of changes in the rate of Uzbek Sum (Table 1);
  5. b) Monthly changes in the Indian rupee rate (Table 2);
  6. c) Average values of exchange rates;
  7. d) Standard deviation of exchange rates;
  8. f) Correlation of data on the dynamics of changes in the exchange rate of the Indian rupee and the Uzbek Soum (Table 3).

Table 1.

Estimated data of changes in the rate of the Uzbek sum to the US dollar

Date UZS/USD Percentage Change The difference
from the mean
The square of
the difference
from the mean
31.01.2016 2831,49
29.02.2016 2851,65 0,0071 -0,0341 0,0012
31.03.2016 2876,75 0,0088 -0,0325 0,0011
30.04.2016 2899,92 0,0081 -0,0332 0,0011
31.05.2016 2992,63 0,0320 -0,0093 0,0001
30.06.2016 2943,46 -0,0164 -0,0577 0,0033
31.07.2016 2964,03 0,0070 -0,0343 0,0012
31.08.2016 2898,64 -0,0221 -0,0633 0,0040
30.09.2016 3010,2 0,0385 -0,0028 0,0000
31.10.2016 3083,96 0,0245 -0,0168 0,0003
30.11.2016 3176,16 0,0299 -0,0114 0,0001
31.12.2016 3217,56 0,0130 -0,0282 0,0008
31.01.2017 3280,25 0,0195 -0,0218 0,0005
29.02.2017 3404,35 0,0378 -0,0034 0,0000
31.03.2017 3595,02 0,0560 0,0148 0,0002
30.04.2017 3706,22 0,0309 -0,0103 0,0001
31.05.2017 3846,33 0,0378 -0,0035 0,0000
30.06.2017 3958,55 0,0292 -0,0121 0,0001
31.07.2017 4070,38 0,0283 -0,0130 0,0002
31.08.2017 4210,35 0,0344 -0,0069 0,0000
30.09.2017 8066,96 0,9160 0,8747 0,7651
31.10.2017 8078,12 0,0014 -0,0399 0,0016
30.11.2017 8095,88 0,0022 -0,0391 0,0015
31.12.2017 8120,07 0,0030 -0,0383 0,0015
31.01.2018 8160 0,0049 -0,0363 0,0013
28.02.2018 8160 0,0000 -0,0413 0,0017
31.03.2018 8120 -0,0049 -0,0462 0,0021
31.04.2018 8048 -0,0089 -0,0501 0,0025
30.05.2018 7950 -0,0122 -0,0534 0,0029
31.06.2018 7850 -0,0126 -0,0538 0,0029
30.07.2018 7770 -0,0102 -0,0514 0,0026
31.08.2018 7798,4 0,0037 -0,0376 0,0014
31.09.2018 8060 0,0335 -0,0077 0,0001
Average 0,0413 0,8016
Variance 0,0259
Standard deviation 0,1608

 

Table 2.

Estimated Change in Indian Rupee to US Dollar Rate

Date INR/USD Percentage Change The difference
from the mean
The square of
the difference
from the mean
31.01.2016 67,85
29.02.2016 68,25 0,0060 0,0038 0,00001
31.03.2016 66,26 -0,0293 -0,0315 0,00099
30.04.2016 66,35 0,0014 -0,0008 0,00000
31.05.2016 67,11 0,0115 0,0093 0,00009
30.06.2016 67,53 0,0063 0,0041 0,00002
31.07.2016 66,74 -0,0118 -0,0140 0,00020
31.08.2016 66,96 0,0034 0,0012 0,00000
30.09.2016 66,60 -0,0054 -0,0076 0,00006
31.10.2016 66,73 0,0020 -0,0002 0,00000
30.11.2016 66,64 -0,0014 -0,0036 0,00001
31.12.2016 67,86 0,0183 0,0161 0,00026
31.01.2017 67,45 -0,0060 -0,0082 0,00007
29.02.2017 66,67 -0,0114 -0,0136 0,00019
31.03.2017 64,86 -0,0272 -0,0294 0,00086
30.04.2017 64,30 -0,0086 -0,0108 0,00012
31.05.2017 64,51 0,0033 0,0011 0,00000
30.06.2017 64,63 0,0019 -0,0003 0,00000
31.07.2017 64,20 -0,0067 -0,0088 0,00008
31.08.2017 63,94 -0,0041 -0,0063 0,00004
30.09.2017 65,31 0,0215 0,0193 0,00037
31.10.2017 64,76 -0,0085 -0,0107 0,00011
30.11.2017 64,47 -0,0044 -0,0066 0,00004
31.12.2017 63,88 -0,0092 -0,0114 0,00013
31.01.2018 63,58 -0,0046 -0,0068 0,00005
28.02.2018 65,21 0,0256 0,0234 0,00055
31.03.2018 65,13 -0,0012 -0,0034 0,00001
31.04.2018 65,51 0,0058 0,0037 0,00001
30.05.2018 67,41 0,0290 0,0268 0,00072
31.06.2018 68,51 0,0163 0,0141 0,00020
30.07.2018 68,54 0,0004 -0,0018 0,00000
31.08.2018 71,01 0,0360 0,0339 0,00115
31.09.2018 72,50 0,0211 0,0189 0,00036
Average 0,0022 0,0067
Variance 0,0002
Standard deviation 0,0147
  1. a) Comparative analysis of the dynamics of changes in the growth rate of the Indian rupee and Uzbek soum against the US dollar shows that during the analyzed period, the rupee is relatively stable than the sum (figure 1.).

It is necessary to emphasize that the following trends are peculiar for the dynamics of the growth rate of the national currencies of India and Uzbekistan. Firstly, both currencies are rising against the US dollar, although, for a rupee, a relatively low rate is characteristic. In the period from January 31, 2016 to September 30, 2018, the Indian rupees increased by only 6.86%, from 67.85 to 72.50 rupees. While the Uzbek sum for this period has grown almost 3 times, from 2831.5 to 8060.0 soums.

Secondly, the Uzbek soum often had a weakening of the course, while the Indian rupee against the dollar had a wavy tendency. It should be noted that the monthly change in the rate of soum never decreased during 2017, while the weakening (depreciation) of the rupee can be observed 9 of the 12 months of the analyzed period.

Thirdly, in the dynamics of the growth rate of the Uzbek Som against the US dollar, a sharp jump can be traced, whereas it is absent in the Indian rupee. The most dramatic changes in the growth rate of the Uzbek soum and the Indian rupee are presented in paragraph 4.b.

  1. b) The highest rates of growth in the exchange rate during the analyzed period, as noted earlier, were observed in the dynamics of change in the Uzbek Som. The growth rate of the Uzbek Sum in September 2016 and March 2017 was relatively high, which amounted to 3.85 and 5.60 percent, respectively.

The collapse of the sum that occurred in September last year led to a sharp jump in the change in the rate of the national currency unit to other currencies, in particular, to the US dollar. It should be noted that on September 4, 2017, the Central Bank of the Republic of Uzbekistan took the path to the liberalization of the national currency, by abandoning the fixed, to the market rate, that is, the rate generated by supply and demand. The Central Bank announced the exchange rate for accounting for customs payments and other statistical calculations of 8,100 soums, raising it (4,235.10 soums) by almost 2 times.

The highest rates of growth in the exchange rate for the Indian rupee in the period under review were observed in March 2016, a 2.93 percent decline and in May and August of the current year 2.9 and 3.6 percent growth, respectively. Considering the dynamics of the growth rate of the Indian rupee, it can be traced that the subsequent periods, these indicators had an attraction to the average value.

  1. c) The average rate of growth of exchange rates of the currencies under consideration for the period under review was of incomparable value. During the period under review, the average growth rate of the Indian rupee was only 0.22%, while the indicator of Uzbek soum was equal to 4.13%.
  2. d) Comparable analysis of currency fluctuations indicates a relatively high variation in the value of the Uzbek Som relative to the Indian Rupee. Dispersion (Variance) and Standard deviation calculated at the rate of Uzbek sum for the analyzed period amounted to 0.0259, while they for the Indian rupee were equal to 0.0002 and 0.1608, respectively.
  3. f) An analysis of the dynamics of changes in the pace of the Indian rupee and Uzbek sum exchange rates to the US dollar allows them to be compared. Although the values of the Indian Rupee and Uzbek Sum rates differ sharply in values, we combined and led to a comparable schedule, which allowed us to see the dynamic trend lines (diagram 2.).

 

The correlation of data on the dynamics of changes in the exchange rate of the Indian rupee and the Uzbek sum for the period under review (from January 2016 to September 2018) generally showed an inverse relationship of values (Table 3).

 

Table 3.

Correlation of data on the dynamics of changes in the Indian rupee and Uzbek soum rate

 


Date
Correlation of two pair Сorrelation separately by year*
31.01.2016
29.02.2016 1 1
31.03.2016 -0,7934911 -0,7934911
30.04.2016 -0,837769 -0,837769
31.05.2016 -0,37475 -0,37475
30.06.2016 -0,2763817 -0,2763817
31.07.2016 -0,3439316 -0,3439316
31.08.2016 -0,3355348 -0,3355348
30.09.2016 -0,4133761 -0,4133761
31.10.2016 -0,4140368 -0,4140368
30.11.2016 -0,424619 -0,424619
31.12.2016 -0,0849312 -0,0849312
31.01.2017 0,02565549 -1
29.02.2017 -0,0923014 -0,999930833
31.03.2017 -0,500606 -0,994246941
30.04.2017 -0,6881393 -0,995975589
31.05.2017 -0,7691671 -0,961546925
30.06.2017 -0,8079262 -0,922716251
31.07.2017 -0,8440031 -0,916450494
31.08.2017 -0,8710506 -0,912667495
30.09.2017 -0,4765682 -0,228241619
31.10.2017 -0,501264 -0,259675649
30.11.2017 -0,5470998 -0,313806346
31.12.2017 -0,6073833 -0,395271511
31.01.2018 -0,6579188 -1
28.02.2018 -0,6442765 0,346863223
31.03.2018 -0,6386454 -0,073672371
31.04.2018 -0,6229298 -0,517770967
30.05.2018 -0,5312124 -0,858485269
31.06.2018 -0,4070609 -0,933762014
30.07.2018 -0,3098984 -0,940704776
31.08.2018 -0,1526043 -0,929723005
31.09.2018 -0,0055367 -0,634581899
Source: Author’s calculations based on data from the website of the Central Bank of Uzbekistan and the Reserve Bank of India
Correlation, separately by year* -the correlation coefficient by year, calculated in relation to the beginning of the year with increasing value by month

 

The correlation coefficient of the change in the exchange rate of the Indian rupee and the Uzbek sum for the period under review was -0.0055367, which indicates not only the opposite, but also a weak dependence.

The correlation coefficient over the years, calculated with respect to the beginning of the year with an increasing value over the months, also did not allow us to identify a significant relationship between the exchange rates of the Indian rupee and the Uzbek sum.

The denser relationship between the exchange rates of the Indian rupee and the Uzbek sum was traced between January and August 2017, although it had an inverse relationship (the correlation coefficient is -0.9126).

  1. Based on the available dynamic data of changes in the exchange rate of the Indian rupee and the Uzbek soum and development trends, as well as the prevailing previous conditions, we predicted values for subsequent periods.
  2. Based on the available dynamic data of changes in the exchange rate of the Indian rupee and the Uzbek Sum, we have built graphs with dynamic trends.

The dynamic trend of changes in the Indian rupee rate does not have a dense linear relationship, which is justified by the value of R² = 0.003. Therefore, a polynomial trend was constructed indicating a good relationship (R² = 0.887).

 

The dynamic trend of changes in the Uzbek soum rate has shown that it has a close relationship with the linear graph (y = 220.0x + 1414,
R² = 0,803), which will determine the predicted values as a continuation of the development trend, as the existing conditions remain.

According to our forecast using the linear trend by the end of December, the amounts relative to the US dollar will be 9334.81 soums.

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