Why is the CAD to INR Exchange Rate Up today on 18th July 2022 (1st half of July 2022)?

Over the last five years, the CAD to INR exchange rate has steadily increased. As of Jul 18, 2022, 1 Canadian dollar equals 61.93 Indian rupees. The value peaked on Jul 18, 2022, at 61.93. Nevertheless, Jul 11, 2022, featured a nadir of 60.31. On average, the Canadian dollar has equaled 60.94 Indian rupees. From the graph below, we can infer that the trend curve has been volatile, with a standard deviation of 0.198 rupees in the past two weeks (4th of July, 2022 to Jul 18, 2022). The currency is expected to have a value above 60 rupees. What used to be 50 to 55 rupees has crossed the 60 mark. This could be because of rising fuel prices, a strong dollar, and a trade and foreign capital deficit.

CAD to INR Exchange Rates (1 CAD into INR)
Date	Open	High	Low	Close
Jul 04, 2022	60.62	61.43	60.62	61.22
Jul 05, 2022	61.33	61.51	60.55	61.34
Jul 06, 2022	60.79	60.88	60.38	60.77
Jul 07, 2022	60.55	60.95	60.49	60.58
Jul 08, 2022	61.00	61.28	60.77	60.99
Jul 11, 2022	60.32	61.19	60.32	61.22
Jul 12, 2022	61.06	61.12	60.90	61.06
Jul 13, 2022	60.93	61.54	60.90	60.92
Jul 14, 2022	61.22	61.47	60.57	61.22
Jul 15, 2022	60.90	61.21	60.76	60.89
Jul 18, 2022	60.36	61.94	60.36	61.18

Several factors affect the CAD to INR exchange rates:

1. Crude Oil

India has one of the largest populations on earth. India imports more than 80% of the demand from other countries to meet the demand for crude oil. The world's economy has been highly volatile. This has been the case in the crude oil price as well. On Jul 05, 2022, the price hit a high of $111.45. The trend line suggests that the prices have been decreasing and increasing haphazardly. On Jul 14, 2022, the prices hit a low of $90.56. This may be a positive sign, but the volatility suggests otherwise.

A decrease in the cost could suggest that the production, transportation, and manufacturing of goods can be more straightforward and inexpensive. This might lead to a decline in inflation, which could increase the value of the Indian currency. However, that has not been the case. Several other factors prevent the rupee from performing better.

Crude Oil (in CAD)
Date	High (CAD	Low (CAD)	Close (CAD)
Jul 05, 2022	145.29	127.01	129.71
Jul 06, 2022	133.15	123.97	128.44
Jul 07, 2022	135.45	125.19	133.18
Jul 08, 2022	136.26	131.44	135.68
Jul 11, 2022	136.62	131.21	135.37
Jul 12, 2022	134.75	124.16	124.79
Jul 13, 2022	127.06	121.50	124.91
Jul 14, 2022	127.23	118.79	125.63
Jul 15, 2022	129.04	123.22	127.16
Jul 18, 2022	133.41	124.39	133.15

Canada is also highly dependent on crude oil. Usually, their crude oil export is more significant than their crude oil import. However, their import numbers have been growing significantly in 2022. In May 2022, they imported crude oil worth 1754M Canadian dollars. This number is considerably higher than their historical import, usually less than $1000M - $1500M (CAD). The increasing import of crude oil in Canada, with the decreasing cost, suggests that the Canadian dollar might be performing well against the US dollar.

However, the disparity between the Indian rupee's performance against the dollar and that of the Canadian dollar against the US dollar suggests that the value of the rupee against CAD might fall further.

2. Commodity Prices and Import/Export

Canada and India import commodities like metal ores and minerals, refined petroleum products, plastic and rubber products, chemicals, energy products, etc. Since the overall import-export deficit affects the currency's performance against the US dollar, the commodities mentioned above play a significant role in the CAD-INR exchange rate.

In May 2022, Canada imported energy products worth 4080.4M Canadian dollars, plastic and rubber products worth 2107M Canadian dollars, chemicals worth 1553M Canadian dollars, metal ores and concentrates worth 1502 M Canadian dollars, and refined petroleum products worth 1350 M Canadian dollars. Canada's total import for June 2022 was worth 64857.80M Canadian dollars, as opposed to their exports worth 69904.10M. The optimistic delta between the exports and imports has positively impacted the currency, which was validated by the Canadian dollar's performance against the US dollar. Apart from that, the price of commodities has increased from 151.9 base points in May 2022 to 152.9 base points in June 2022. However, the rate of increase has slowed down. This is validated by the graph below. The percentage increase in commodity prices has decreased from 37.6% in May 2022 to 36.2% in June 2022.

Canada: Commodity Prices
Date	% change YOY
Jul-21	38.6
Aug-21	27.5
Sep-21	32.5
Oct-21	38.6
Nov-21	37.6
Dec-21	29.3
Jan-22	30.6
Feb-22	30.3
Mar-22	42.6
Apr-22	38.3
May-22	37.6
Jun-22	32.4

Similarly, India also imported such commodities. India's total import was worth 85.74B Canadian dollars. However, India's export was only worth 45.60B Canadian dollars. This stark negative difference between imports and exports has led to a low GDP, which thereby has caused inflation, thus reducing the value of the Indian rupee.

India: Commodity Prices
Date	Base Points change YOY)
Jul-21	162.5
Aug-21	162.9
Sep-21	163.2
Oct-21	165.5
Nov-21	166.7
Dec-21	166.2
Jan-22	165.7
Feb-22	166.1
Mar-22	167.7
Apr-22	170.1
May-22	171.7
Jun-22	172.6

Inflation affects commodity prices. From the table above, it can be seen that the commodities’ prices have increased from 171.7 base points in May 2022 to 172.6 base points in June 2022. This trade deficit justifies and validates the poor performance of the Indian currency against both USD and CAD.

3. Interest rates

Canada expects the inflation rates to grow further. They also believe that the cost of restoring economic stability will be higher. They expect global economic growth to decrease from 3.5% in 2022 to 2% in 2023 before it strengthens to 3% in 2024. The bank of Canada has taken restorative measures to ease the impact of the struggling economy on the people.

One such measure was to increase the interest rate by 100 basis points. The bank believes this will help consumers, businesses, and people in general while they continue assessing the broader impact of the growing inflation rates. They aim to reduce the inflation rate to 2% by 2024. The stark increase in the interest rate from March 2022 mirrors the growing inflation rates. There has been a 1% increase from 1.5% in June 2022 to 2.5% in July 2022.

Canada: Interest Rates
Date	Rate (%)
Apr-21	0.15
May-21	0.2
Jun-21	0.2
Jul-21	0.2
Aug-21	0.2
Sep-21	0.2
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

The Reserve bank of India has also taken a similar measure. The RBI has increased the interest rate by 50 basis points. The interest rates have risen from 4.4% in May 2022 to 4.9% in June 2022. However, economists expect the interest rates to grow further by December 2022. India aims to curb the inflation rate from 6% to less than 3% by 2024.

India: RBI Interest Rates
Date	Rate (%)
Feb-19	6.25
Apr-19	6.00
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

This increases lending and borrowing rates in public and private banks, making it difficult for people. These interest rates have a direct impact on inflation and, therefore, the value of the currency. The higher the inflation, the lower the value of the money.

4. Inflation

The inflation rate gives insight into the currency's performance and value. The higher the inflation, the lower the value of the money. Inflation has been a problem in almost every country today. While some countries are adversely affected by it, some can tolerate the ill effects of inflation.

Canada has also had a stark rise in inflation rates. Within 12 months, the inflation rate increased by 5%. Canada was one of the countries adversely affected during the coronavirus pandemic. The government's strict laws prevented production growth, which has had severe repercussions. The rising inflation rates validate that. While the Bank of Canada increased its repo rates in June 2022 to tackle inflation, the inflation rate has only increased from 7.7% in May 2022 to 8.1% in June 2022. Rising inflation levels are a threat to the country's economy and currency.

Canada: Inflation Rates
Date	Rate (%)
Jul-21	3.70
Aug-21	4.10
Sep-21	4.40
Oct-21	4.70
Nov-21	4.70
Dec-21	4.80
Jan-22	5.10
Feb-22	5.70
Mar-22	6.70
Apr-22	6.80
May-22	7.70
Jun-22	8.10

The inflation rates have been increasing since September 2021 in India. The growth appeared to slow down at the beginning of 2022; however, inflation rates grew significantly in March, April, and May. However, the rates decreased to 7.01% in June 2022.

India: Inflation Rates
Date	Rate (%)
Jun-21	6.26
Jul-21	5.59
Aug-21	5.30
Sep-21	4.35
Oct-21	4.48
Nov-21	4.91
Dec-21	5.66
Jan-22	6.01
Feb-22	6.07
Mar-22	6.95
Apr-22	7.79
May-22	7.04
Jun-22	7.01

The decrease in inflation rates appears to be a positive sign. The efforts of the RBI and the Indian government seem to be working at the moment in terms of inflation; however, the currency's performance does not reflect that.

5. Unemployment rate and Job Availability

Employment rates and job availability affect the currency indirectly. An increase in employment rates and job availability suggests that the economy is stabilizing. In Canada, the unemployment rate has decreased from 5.1% in May 2022 to 4.9% in June 2022. This indicates that more people are finding jobs. Canada's new job openings are helping to increase the employment rate. Since February 2022, the employment rate has been relatively good, with an all-time high of 61.9% throughout March, April, and May 2022. Employed personnel has more buying power; therefore, domestic investment will increase, reducing inflation. This increases the currency's performance and value.

Canada: Unemployment Rate
Date	Rate (%)
Sep-21	6.9
Oct-21	6.7
Nov-21	6
Dec-21	6
Jan-22	6.5
Feb-22	5.5
Mar-22	5.3
Apr-22	5.2
May-22	5.1
Jun-22	4.9

However, in India, the unemployment rate has increased from 7.12% in May 2022 to 7.8% in June 2022. However, there was a significant decrease in unemployment in July 2022, as the unemployment rate came down to 6.8%. This uncertainty and volatility have reduced the buying power of the people, thereby reducing domestic investments in the country.

India: Unemployment Rate
Date	Rate (%)
Aug-21	8.32
Sep-21	6.86
Oct-21	7.74
Nov-21	6.97
Dec-21	7.91
Jan-22	6.56
Feb-22	8.11
Mar-22	7.57
Apr-22	7.83
May-22	7.12
Jun-22	7.8
Jul-22	6.8

Several MNCs in India has imposed a hiring freeze, which could be a reason for the rising unemployment rates. The rupee's poor performance validates this.

6. Budget deficit and national debt levels

Almost every country has debt. While these debts are manageable, higher debt levels lead to inflation, which devalues the currency. Similarly, a country presents its budget for the forthcoming financial year when the actual expenditure exceeds the budget, and inflation increases, subverting the money.

Canada spent USD 3.91B less than its budget for the first quarter. And their external debt has reduced from $USD 2.59Bin the last quarter of 2021 to $USD 2.49Bin the first quarter of 2022. This has led to the better performance of the Canadian dollar. The graph below states that most of the time, Canada's export is more significant than its imports. Only in December 2021 they imported goods worth more than their exports. In June 2022, they maintained a positive delta of 5046.3M CAD$, suggesting that they have a good trade balance. This validates the poor performance of the Indian rupee against the Canadian dollar.

Canada: Balance of Trade
Date	CAD$ Millions
44378.00	102.50
44409.00	841.30
44440.00	731.60
44470.00	1655.60
44501.00	2236.90
44531.00	-1448.10
44562.00	3336.30
44593.00	2836.80
44621.00	2006.90
44652.00	1941.50
44682.00	4768.90
44713.00	5046.30

On the other hand, India releases its union budget in February every year. In the first quarter of 2022, India spent USD 13.4B more than the budget. And India's external debt stands at USD 620B at the end of the first quarter of 2022. This increased from USD 614B in the last quarter of 2021. This has increased the country's inflation rates, which has weakened the rupee. Another cause is the balance of trade.

India: Balance of Trade
Date	CAD$ Millions
Jun-21	12.77
Jul-21	10.75
Aug-21	11.59
Sep-21	12.19
Oct-21	11.12
Nov-21	10.19
Dec-21	14.06
Jan-22	11.32
Feb-22	11.24
Mar-22	15.66
Apr-22	11.53
May-22	11.35
Jun-22	12.85

India has almost maintained a negative delta regarding imports and exports; that is, imports are more significant than exports. From the graph above, we can see that the balance has only been widening since March 2022.

7. Politics and international policies

A government's stability also impacts the country's currency—higher uprisings and protests against the government, lower foreign investments, and lower currency value. Recently, the Indian government has faced severe backlash from its citizens for many reasons, including religion, tax, political party instability, etc. This has led to the prosperity of only a few parts of the nation. This biased development has also led to the depreciation of the Indian currency.

Both Canada and India have had to face backlash from their citizens. This has affected both their currencies negatively. However, Canada has had a better performance against the United States dollar than its counterpart-the Indian rupee.

Extreme volatility and instability have led to the poor performances of both currencies. However, the performance of the Indian rupee is relatively inferior to that of the Canadian dollar. Both the currencies’ performance against the United States dollar has been poor. Nevertheless, when compared, the Canadian dollar has had a relatively better performance. While both governments take necessary precautionary measures to bolster their respective country's currency, unprecedented circumstances pose hindrances. The rupee is expected to fall further until it regains its value by the beginning of the following year.