Forex Movements - What do they say

During the recent past when the financial crisis has started we have seen a lot of ups and downs in the forex movements of many currencies around the world. What actually can we make from them and whether there is any solution for the stabilization of the forex movements in future? The following thoughts are placed to understand the dynamics and finding a reasonable solution to stabilize the forex rates.

Why there is a recent spike in the INR vs USD. INR appreciated approximately 12% against USD. This was mainly due to increase in the flow of US$ in to India (and other emerging markets) which increased the demand for INR. When demand increases the price will increases, which appreciated the value of INR.

What happens when the foreign capital flows into the country?
The inflow of cash will increase the money supply within the economy which will create a boom.
Example: When US is importing goods from export oriented countries (Japan and China), the US$ are going out from US. This decreases the money supply within the US which will increase the interest rates within the country. As the interest rate rises, the debt driven US households would decrease the consumption which affects the export oriented countries.

So what the export oriented countries do to keep the interest rates of US low?
They pump in the US$ back to US through purchase of US Treasury. As the demand for the US Treasury increases, the yield on these bonds decrease.
Going by the Capital asset pricing model, interest rate would be equal to “Risk-Free Rate + Risk Premium”.
As the Risk-Free Rate (US Treasury bond yields) has decreased there would be decrease in the interest rates and so the demand for the goods would not be decreasing.
But this cannot go for long and every thing in this world needs to be balanced. As the foreign capital continued to flow to US, there was a boom which resulted in current crisis.

Note: The two biggest holders of US treasury securities (http://www.treas.gov/tic/mfh.txt) are as follows:
1) China with 799 million (40% of its more than USD two trillion forex reserves) (http://www.bloomberg.com/apps/news?pid=20601087&sid=alZgI4B1lt3s).
2) Japan with 752 million (75% of the more than USD one trillion forex reserves) (http://www.thehindubusinessline.com/businessline/blnus/10071706.htm).