Abstract. This paper investigates the dynamic co-movement and causality among the daily returns of four currency pairs: USD/INR, EUR/INR, GBP/INR, and JPY/INR, covering the period from 2000 to 2024. Using Wavelet Power Spectrum (WPS) and Wavelet Coherence Analysis (WCA), we explore the relationships and causal dynamics between these currency pairs across various time scales. Our findings reveal significant coherence among the currency pairs from 2008 to 2019, likely influenced by global events such as the 2008 financial crisis. The findings also reveal that the majority of the pairs exhibit positive and strong co-movement across different scales. Finally, bidirectional causality is observed between USD and EUR, while the other pairs exhibit either unidirectional causality or independent movements.

Keywords: co-movement, causality, exchange rates, returns, wavelet analysis.