BPSC 69th CCE Prelims General Studies · Question 59 of 144

Correct — B, Pound Sterling. 'Costliest' here means the currency whose single unit costs the most, and the cleanest way to settle it for an Indian paper is to price all three against the rupee on the same day using the Reserve Bank of India's own reference rate. On 29 September 2023, the last publication day of the month in which this paper was held, the RBI reference rates were: 1 US Dollar = ₹83.0580, 1 Euro = ₹87.9379 and 1 Pound Sterling = ₹101.6713. One pound therefore cost about ₹13.73 more than one euro and about ₹18.61 more than one dollar. The same ordering falls out of the European Central Bank's euro reference rates for that day, computed from a different desk in a different currency: 1 EUR = 1.0594 USD and 1 EUR = 0.86458 GBP, which works out to 1 GBP = 1.2253 USD = 1.1566 EUR — within a fraction of a paisa of the cross-rates implied by the RBI table. Two central banks, one answer: among the three currencies named, sterling has the highest unit value. That result is also not an accident of the week the exam fell in. Over the whole ECB daily series — 7,061 business days from 4 January 1999 to the present — sterling has never once closed below the euro (its weakest reading is 0.97855 GBP to the euro on 29 December 2008, i.e. £1 = €1.02) and never once closed below the dollar (its lowest is $1.0596 on 28 September 2022, during the gilt sell-off that followed the UK's mini-budget). The euro-versus-dollar ranking is nothing like as settled — the euro closed below the dollar on 753 of those days — but that only affects which of the two is second, not which of the three is first.

• (a)Euro — Second of the three on the day, not first. The RBI reference rate on 29 September 2023 put the euro at ₹87.9379 against sterling's ₹101.6713, and the ECB's own quote of 0.86458 pounds to the euro says the same thing from the other side — it takes only about 86 pence to buy a euro, so the euro is the cheaper unit. The option is genuinely tempting for a candidate who remembers that the euro was above the dollar in 2023 and stops there, because that half of the ranking is correct; the euro simply is not the top of a list that includes sterling.
• (c)US Dollar — The reflex answer, and the trap the question is built on. The dollar is the world's dominant reserve, invoicing and settlement currency, and it is the currency the rupee is habitually quoted against, so it feels like the 'strongest'. But dominance is about how widely a currency is used, not how much one unit of it costs, and on the RBI table for 29 September 2023 the dollar was the cheapest of the three at ₹83.0580 — below both the euro and sterling. A currency's unit price is largely an artifact of how it was denominated when it was created.
• (d)None of the above — The stem asks which currency 'among the following' is the costliest, so it is a comparison confined to the three named units, and one of them plainly wins it on every published rate. 'None of the above' can only stand if all three are eliminated, and sterling is not eliminated by anything — it heads the list on the RBI reference rate, on the ECB reference rate and on the cross-rates derived from either.

An exchange rate is simply a price: the number of units of one currency needed to buy one unit of another. Two quite different things get called the 'value' of a currency and confusing them is what this question punishes. The first is the price of one unit — what ₹101.67 for a pound or ₹83.06 for a dollar measures. That figure depends heavily on an accident of history, namely the size of the unit a country chose when it created or last redenominated its money, which is why the Japanese yen sits at ₹0.5581 to the yen on the very same RBI table while Japan remains one of the world's largest economies. The second is a currency's strength or importance — its purchasing power at home, its stability, and how far the rest of the world is willing to hold and settle in it. The US dollar leads decisively on that second measure and still trails both sterling and the euro on the first. India runs a market-determined exchange rate: the rupee's external value is set by demand for and supply of foreign currency from importers, exporters, investors, remitters and travellers, with the Reserve Bank intervening as a participant rather than announcing a parity. The RBI's reference rate, published on every business day for the US dollar, the euro, the pound and the yen, is the benchmark quote for that market.

Read the stem twice before answering, because two words in it decide everything. 'Among the following' fences the comparison to the three currencies listed, so the question is not asking for the highest-valued currency in the world and there is no need to hunt for one outside the list. 'Costliest' means dearest per unit — the price of one euro, one pound, one dollar — and not the biggest economy, the strongest currency or the most widely used one. Once both words are read correctly the answer follows from a single number a candidate can carry: around the date of this paper one pound was worth about ₹102, one euro about ₹88 and one dollar about ₹83, so sterling is first by a clear margin. The discriminating fact, and the only one worth memorising, is that sterling has stood above both the euro and the dollar continuously — it has not closed below either since the euro came into existence in 1999. That is why the answer does not shift with the year in which the question is asked. The euro-dollar pair, by contrast, has crossed over more than once: the euro spent 706 business days below the dollar between January 2000 and December 2002 and another 47 days below it between August and November 2022, so any card or coaching note that fixes the ranking as 'pound, then dollar, then euro' is stating as permanent something that was simply false in 2023, when the euro stood above the dollar throughout the year.

• RBI reference rates, 29 September 2023: 1 USD = ₹83.0580; 1 EUR = ₹87.9379; 1 GBP = ₹101.6713; 100 JPY = ₹55.8100 — sterling first, euro second, dollar third
• ECB euro reference rates for the same day: 1 EUR = 1.0594 USD and 1 EUR = 0.86458 GBP, which gives 1 GBP = 1.2253 USD and 1.1566 EUR — an independent confirmation of the same ordering
• Across the full ECB daily series of 7,061 business days from 4 January 1999, sterling has never closed below the euro (weakest: £1 = €1.0219 on 29 December 2008) and never below the dollar (lowest: £1 = $1.0596 on 28 September 2022)
• The euro has closed below the US dollar on 753 of those days — 706 of them between 27 January 2000 and 5 December 2002, and 47 between 23 August and 10 November 2022 — so the second and third places on this list are not fixed
• Per-unit price is not a measure of economic strength: the same RBI table values the Japanese yen at about ₹0.56, because the yen was denominated as a small unit, not because Japan's economy is small
• The RBI publishes its reference rate for the US dollar, euro, pound sterling and Japanese yen on every business day, based on a market poll of banks around noon; it is the benchmark used for rupee conversions in India

• Reading 'costliest' as 'strongest' or 'most important' and answering US Dollar — reserve-currency status says nothing about the price of one unit
• Fixing the ranking as pound, then dollar, then euro. That was true in some years and false in 2023, when the euro stood above the dollar for the whole year
• Ignoring 'among the following' and reaching for 'None of the above' because some currency somewhere is dearer than a pound — the stem restricts the comparison to the three units named
• Comparing a per-unit quote with a per-hundred quote: the RBI publishes the yen as rupees per 100 yen, so ₹55.81 is the price of a hundred yen, not one

BPSC asks the comparison bare — three currencies, 'which is the costliest', and 'None of the above' parked at option (d) to catch a candidate who overthinks the phrase 'among the following'. It wants one number remembered, not a theory. UPSC has never asked which currency is dearest; it asks what sets the price in the first place, and has asked it twice in the same words, in 1998 and again in 2012 — whether the World Bank, demand for a country's goods and services, the stability of its government or its economic potential decides a currency's international price. Beyond that it moves to the analytical layer: PPP versus market exchange rates, NEER against REER, the consequences of devaluation, and what capital account convertibility means. Learn the rupee quote for BPSC and the mechanism for UPSC.

• practice — not a real PYQ

  In the Reserve Bank of India's daily reference rate, which one of the following currencies is quoted as rupees per 100 units rather than per single unit?

  • (a)US Dollar
  • (b)Euro
  • (c)Pound Sterling
  • (d)Japanese Yen

  Answer(d) Japanese Yen — the RBI publishes it as rupees per 100 yen (₹55.8100 on 29 September 2023, i.e. about ₹0.56 per yen), while the dollar, euro and pound are each quoted per single unit.

• practice — not a real PYQ

  Under a floating exchange rate, the external value of a country's currency is determined primarily by

  • (a)a parity announced by the World Bank
  • (b)demand for and supply of that currency in the foreign exchange market
  • (c)the face value printed on its banknotes
  • (d)the size of the country's gold reserves alone

  Answer(b) demand for and supply of that currency in the foreign exchange market — that demand and supply comes from importers, exporters, investors, remitters and travellers. The World Bank sets no exchange rate, denomination is only an accident of how the unit was created, and gold is one asset among several in modern reserves.