Behavior of Exchange Rate Volatility: Once Again in Action

In the area of international trade few studies have examined whether fluctuation in exchange rate is base on macro variables that are used in this study. Basically the study is conducted in Pakistan. As it has been noticed that there is continuously increasing in exchange rate since last 20 years. This paper investigate that foreign direct investment, inflation and supply of money have strong relationship with exchange rate. This means that if there is increase in foreign direct investment then the exchange rate will decrease, if there is increase in supply of money then the exchange rate will grow and if there is increase in inflation then the exchange rate will increase and vice versa.