Question

The factor that least influences exchange rate fluctuations:

• A. Industrial Production
• B. Investor sentiments
• C. Interest Rates
• D. Consumer Price Index
• E. Goods and Service Tax

Hint:

Differentiate between macroeconomic fundamentals and temporary market psychology when analyzing currency movements.

Answer 1

The Correct Option is B

Step 1: Recall the main drivers of exchange rate.
Exchange rates are heavily influenced by interest rate differentials, inflation CPI), industrial output, and fiscal/trade policies.
Step 2: Analyze the options.
- Industrial production affects exports/imports, hence impacts currency.
- Interest rates are among the most crucial determinants.
- CPI (inflation) directly affects purchasing power and thus exchange rate.
- GST has little direct impact but still contributes indirectly via trade competitiveness.
- Investor sentiments can influence short-term trends but are not a structural determinant.
Step 3: Conclusion.
The least influential is investor sentiments.
\[ \boxed{B \text{ Investor sentiments}} \]