Why is the CAD to INR Exchange Rate Up today on 15th April 2023 (1st half of April 2023)?

Key points:

• The exchange rate from CAD to INR is rising.
• The Bank of Canada raised interest rates.
• The Reserve Bank of India has increased the interest rates to 6.5% and is expected to raise interest rates by 25 bps in February 2023.
• Inflation and Unemployment rates are up in India and Canada.

Over the past years, the Canadian dollar has appreciated significantly against the Indian rupee, with one Canadian dollar currently equivalent to 60 Indian rupees as of April 15, 2023. The exchange rate has been volatile recently, reaching a new high of 61.35 on April 14, 2023, and a new low of 59.87 on April 7, 2023. The trend curve has been fluctuating with a standard deviation of 0.145 rupees. The exchange rate changes indicate that the Canadian dollar has been strengthening recently. An item that could initially be bought for 50-55 rupees now costs 60. Factors such as a foreign capital imbalance and rising gas prices and demand could lead to the overvaluation of the currency.

CAD to INR Exchange Rates (1 CAD into INR)
Date	Open	High	Low	Close
03-Apr-23	60.89	61.22	60.84	60.75
04-Apr-23	61.15	61.22	60.98	61.14
05-Apr-23	61.04	61.10	60.75	61.05
06-Apr-23	60.86	60.86	60.61	60.86
07-Apr-23	60.60	60.60	59.87	60.60
10-Apr-23	60.65	60.85	59.96	60.57
11-Apr-23	59.97	60.86	59.97	59.97
12-Apr-23	60.90	61.04	60.78	60.90
13-Apr-23	60.92	61.15	60.89	60.93
14-Apr-23	61.16	61.35	61.15	61.17
15-Apr-23	61.21	61.21	61.21	61.21

Several factors affect the CAD to INR exchange rates:

1. Crude Oil

India has a large population, and this particular source provides around 80% of the country's annual crude oil needs. Changes in crude oil prices can gauge the global economy's state. On April 11 and 14, 2023, the price was CAD 112.79 and 99.21, respectively. The passage has a somewhat ambiguous flow, but it may provide a glimpse of optimism. Lower crude oil prices would make producing, shipping, and selling crude oil less costly and more manageable. If the Indian government wants to boost the rupee's value, it should curtail the production of new currency.

Crude Oil (in USD)
Date	High (CAD)	Low (CAD)	Close (CAD)
03-Apr-23	110.30	106.67	108.58
04-Apr-23	109.90	106.95	108.43
05-Apr-23	109.17	107.13	108.32
06-Apr-23	108.92	107.16	108.57
07-Apr-23	109.61	107.43	107.61
10-Apr-23	110.18	107.18	110.10
11-Apr-23	112.79	109.75	112.43
12-Apr-23	112.34	110.54	110.61
13-Apr-23	111.71	109.89	111.12
14-Apr-23	99.56	96.86	99.21

The commodity is highly important, with Canada also relying heavily on it. Crude oil is typically profitable when sold as it often generates more revenue than production costs. By 2022, it is expected to be even more lucrative. In Q2 of 2022, the cost of crude oil was $1,754,000. This is a significant amount compared to when production first started, which typically yielded only between $1 billion and $1.5 billion. If the cost of imported crude oil increases, this could potentially result in the strengthening of the Canadian dollar. However, the Indian rupee's value against the Canadian and US dollars will continue to fall.

2. Commodity Prices and Import/Export: 

It is worth noting that the trade between Canada and India, specifically the purchase of goods, significantly impacts the exchange rate between the Canadian dollar and the Indian rupee. This exchange rate is closely related to the strength of each country's economy. For instance, both countries have imported various products, including metal ores, plastics, rubber, chemicals, and fuels, from other countries in the past.

In August 2022, Canada's spending on energy-related products was $9.702 trillion. The value of plastics and rubber was $1046 million, chemicals were $153 million, metal ores and concentrates were $100 million, and finished petroleum products were $4179 million. During the same month, Canada's exports were worth 638,644,000,000,000 CAD, while imports were worth 653,833,000,000,000 CAD. The difference between what Canada exported and imported helped to strengthen the Canadian dollar against the US dollar. Moreover, the prices of goods have decreased monthly since June 2022, from 32.4% to 17.6% in August 2022 and 1.2% in January 2023.

Canada: Commodity Prices
Date	% change YOY
Mar-22	42.66
Apr-22	38.3
May-22	37.6
Jun-22	32.4
Jul-22	19.1
Aug-22	17.3
Sep-22	12.7
Oct-22	8.1
Nov-22	8.1
Dec-22	8.1
Jan-23	1.2
Feb-23	-5.2

3. Interest rates

Most Canadians anticipate a continued price rise and believe reviving the economy will put more strain on the budget. The global economy is projected to grow at 3.5% in 2022, 2% in 2023, and 3% in 2024. To help Canadians weather the economic challenges, the Bank of Canada has implemented several measures.

Recently, the interest rate has increased by 100 basis points, as the central bank believes that rising inflation rates will benefit people, businesses, and consumers in the long term. The bank forecasts that inflation will reach a low of 2% in 2024. Due to the increasing inflation, interest rates have surged, rising from 2.5% in June and August 2022 to 4.5% in January 2023, an increase of 2 percentage points.

Canada: Interest Rates
Date	Rate (%)
Oct-21	0.2
Nov-21	0.2
Dec-21	0.1
Jan-22	0.15
Feb-22	0.2
Mar-22	0.45
Apr-22	0.95
May-22	0.95
Jun-22	1.5
Jul-22	2.5
Aug-22	2.5
Sep-22	3.25
Oct-22	3.75
Nov-22	4.25
Dec-22	4.5
Jan-23	4.5

The Reserve Bank of India has also increased interest rates in response to rising inflation. In July and August of the current year, the interest rate was 5.4%, up by 50 basis points. The rate was 4.9% in July and will remain the same in August 2022. The central bank plans to increase interest rates to 6.5% by December 2022. The Indian government aims to bring inflation down to 3% or lower by 2024.

India: RBI Interest Rates
Date	Rate (%)
Jun-19	5.75
Aug-19	5.40
Oct-19	5.15
Mar-20	4.40
May-20	4.00
May-22	4.40
Jun-22	4.90
Jul-22	5.40
Aug-22	5.40
Sep-22	6.15
Dec-22	6.50

The government and private sector have implemented stricter measures to restrict financial autonomy, making it more challenging to obtain funds. Changes in inflation and inflation expectations can cause interest rates to fluctuate. As the cost of living increases, individuals have less disposable income.

4. Inflation

Inflation, which determines money's purchasing power and duration, is a concern in almost every economy. It affects people's spending power when the cost of living increases. While some countries are more severely affected than others, no country is immune to inflation.

Canada has also experienced a significant increase in inflation, with prices rising by 5% in one year. The COVID-19 pandemic also affected Canada, and government regulations hindered factories from expanding. However, the Bank of Canada raised repo rates to combat inflation in June 2022, leading to a decline in Canadian consumer prices from 8.1% in June 2022 to 7.6% in July 2022 and 5.2% in February 2023. As inflation has decreased, Canada's economy has performed well.

Canada: Inflation Rates
Date	Rate (%)
Mar-22	6.7
Apr-22	6.8
May-22	7.7
Jun-22	8.1
Jul-22	7.6
Aug-22	7.00
Sep-22	6.9
Oct-22	6.9
Nov-22	6.8
Dec-22	6.3
Jan-23	5.9
Feb-23	5.2

The cost of living in India has been consistently rising since September 2021. While there was a brief pause in the growth and prices in early 2022, there was a significant surge in inflation in March, April, and May. The inflation rate continued to rise from July to September 2023, reaching its lowest level of 5.66% in February 2023.

India: Inflation Rates
Date	Rate (%)
Mar-22	6.95
Apr-22	7.79
May-22	7.04
Jun-22	7.01
Jul-22	6.71
Aug-22	7.00
Sep-22	7.41
Oct-22	6.77
Nov-22	5.88
Dec-22	5.72
Jan-23	6.52
Feb-23	6.44
Mar-23	5.66

The problem of inflationary pressure is on the rise, and due to the poor state of the Indian rupee, the government of India and the Reserve Bank of India (RBI) are left with no option but to increase prices.

5. Employment Rate and Job Availability

The employment rate is an important factor that affects the value of a country's currency. The economy improves when more people are employed, and more businesses are hiring. In Canada, the unemployment rate decreased from 5.1% in May 2022 to 4.9% in June 2022, but it is expected to rise to 5.4% in August 2022. Despite the decrease in the unemployment rate from October to December, more job opportunities are still needed. Although there have been many new job openings since February 2022, the number of people joining the workforce has caused a decrease in domestic investment and inflation. However, the economy has improved as more people are saving money.

Canada: Unemployment Rate
Date	Rate (%)
May-22	5.1
Jun-22	4.9
Jul-22	4.9
Aug-22	5.4
Sep-22	5.2
Oct-22	5.2
Nov-22	5.1
Dec-22	5
Jan-23	5
Feb-23	5
Mar-23	5

In July 2022, the unemployment rate in India was 6.8%, but it rose to 8.2% in August. However, experts predict a decrease to 6.4% by September 2022. Nevertheless, in March 2023, the unemployment rate was 7.8%. Due to concerns about the economy, people are spending less, resulting in a decrease in foreign funds entering the country. Despite this, India has a low unemployment rate due to multinational corporations simplifying the hiring process.

India: Unemployment Rate
Date	Rate (%)
Apr-22	7.83
May-22	7.12
Jun-22	7.8
Jul-22	6.8
Aug-22	8.2
Sep-22	6.4
Oct-22	7.7
Nov-22	8
Dec-22	8.3
Jan-23	7.1
Feb-23	7.5
Mar-23	7.8

6. Budget deficit and national debt levels

The majority of countries are not in debt, with some exceptions. High levels of debt can lead to inflation and a decline in the value of a country's currency. When actual spending exceeds planned levels and inflation reduces the value of money, governments create a budget for the following fiscal year.

In contrast, Canada spent $3.91 billion less than its planned budget in the first three months of 2022, decreasing $59 million in external debt from Q4 2022 to Q1 2023. As a result, the Canadian dollar has increased in value. The graph shows that exports in Canada have grown faster than imports, with a surplus of CAD 2,372.7M in July and CAD 40M due in November 2022. The strength of the Canadian economy can be attributed to the strength of the Canadian dollar.

Canada: Balance of Trade
Date	CAD$ Millions
May-22	4768.9
Jun-22	5046.3
Jul-22	2372.7
Aug-22	-2535
Sep-22	8675
Oct-22	4987
Nov-22	-2187
Dec-22	-1595
Jan-23	1204.1
Feb-23	422.3

The Indian national budget is released every February, and the country spent more money in the first three months of 2022 compared to previous years. The external debt of India was USD 620 billion at the end of the first quarter, which is expected to reduce to $614 billion by the end of 2021.

Due to this, the value of the Indian rupee has declined, and inflation has gone up. Additionally, it is suggested to consider the trade deficit, which has been a long-standing issue for India. In July and August 2022, India will experience a significant negative delta, and as of March 2023, Canada's trade deficit was C$19.7 million.

India: Balance of Trade
Date	CAD$ Millions
Mar-22	15.66
Apr-22	11.53
May-22	11.35
Jun-22	12.85
Jul-22	41.47
Aug-22	38.68
Sep-22	19.33
Oct-22	20.7
Nov-22	15.3
Dec-22	31.8
Jan-23	23.4
Feb-23	17.43
Mar-23	19.7

7. Politics and international policies

Its currency's value can reflect the stability of a country's government, as the people's trust in the government affects the currency's importance. India's government is criticized for various reasons, resulting in varying economic performance and a decrease in the rupee's value due to an uncertain economic growth rate. The media has negatively portrayed Canada and India, decreasing the value of both currencies.

However, the Canadian dollar has outperformed the Indian and US rupee. Both currencies have been highly volatile but have still performed well. The Canadian dollar has increased in value, while the Indian rupee has decreased. Despite the benefits of having stable currencies for both countries' governments, unexpected events may disrupt the best-laid plans. The rupee's value is anticipated to remain stable for the rest of the year.