Why is the USD to INR Exchange Rate Down today on 14th July 2023 (1st half of July 2023)?

Key points:

• The value of the Indian rupee has raised against the dollar.
• The Federal Reserve of the United States has recently implemented a monetary policy to proactively increase interest rates to address and alleviate the potential consequences of inflationary forces.
• The current trend in inflation rates in the United States and India is declining.
• According to market projections, the Reserve Bank of India (RBI) is anticipated to enact a 25 basis point increase in interest rates in February 2023. The Indian economy demonstrated a promising upward trajectory in the previous quarter.

Based on the financial experts' analysis, India's economic growth trajectory is anticipated to undergo a substantial metamorphosis in the post-2023 period. Notwithstanding the prevailing global economic downturn, it is worth mentioning that the economic conditions in the United States have exhibited encouraging indications of amelioration. India's Gross Domestic Product (GDP) witnessed a remarkable surge of 13.5% in the latest quarter, reflecting a significant expansion in economic activity. The rupee exhibited a consistent and stable valuation. Financial analysts typically prefer to evaluate India's economic growth using annual measurements instead of quarterly ones. The collaborative efforts between the Reserve Bank of India (RBI) and diverse governmental entities have resulted in positive outcomes for the Indian economy. The recent policy measures enacted by the government, such as the upward adjustment of interest rates and the imposition of trade restrictions, have yielded favorable outcomes for the economy and currency, thereby generating a positive influence.

USD to INR Exchange Rates
Date	Open	High	Low	Close
Jul 03, 2023	82.0963	82.1124	81.7662	82.0963
Jul 04, 2023	81.9501	82.0256	81.8667	81.9501
Jul 05, 2023	82.0071	82.3482	81.9781	82.0071
Jul 06, 2023	82.3941	82.8238	82.2835	82.3941
Jul 07, 2023	82.7684	82.7683	82.534	82.7684
Jul 10, 2023	82.6153	82.7153	82.5505	82.6153
Jul 11, 2023	82.5253	82.6333	81.2669	82.5253
Jul 12, 2023	82.3999	82.464	81.9722	82.3999
Jul 13, 2023	82.0018	82.1413	81.9535	82.0018
Jul 14, 2023	82.0308	82.1926	81.928	82.0308

According to the latest market data, it is evident that the USD/INR exchange rate is presently positioned at 82.00. It denotes the prevailing exchange rate between the United States dollar and the Indian rupee, reflecting the valuation of one unit of the former about the latter. During the latter half of the current month, the rupee has notably improved its stability compared to the preceding half. The recent market performance of the rupee exhibits a positive trajectory, suggesting significant growth potential within the global economy. The heightened volatility observed in the valuation of the Indian rupee has further intensified the existing concerns regarding the enduring stability of the Indian economy and its currency. The Indian rupee exhibited a significant upswing, attaining its peak value of 82.82 against the US dollar on July 6, 2023. Subsequently, the asset in question underwent a notable downturn, reaching a nadir of 81.27 on July 11, 2023. The asset under analysis has exhibited 14-day historical volatility, with a daily average of 0.052 points. The Indian government, in collaboration with the Reserve Bank of India (RBI), is proactively executing strategic initiatives to address the devaluation of the rupee. Global central banks, including the highly regarded Federal Reserve, have taken measures to lower interest rates in light of the current economic conditions characterized by increased inflationary pressures.

For the currency to be strong and stable, many factors must be in order. They are:

1. Crude Oil
2. Gold imports
3. GDP & Import/Export
4. Inflation rates
5. Interest rates
6. Foreign and Domestic Investment

1. Crude Oil

India's crude oil imports are primarily sourced from the United Arab Emirates, Russia, and Saudi Arabia, accounting for over 80% of the total implications. However, it is essential to highlight that India's ports presently hold a relatively modest 10% stake in the global trade market. India has successfully executed a well-thought-out strategy to augment its crude oil import diversification by strengthening its procurement from critical sources, including Gabon, Colombia, Canada, Nigeria, and Iraq. The strategic decision to pursue this course of action is motivated by mitigating the potential risks associated with overreliance on a limited group of oil producers. The current global economic landscape has been significantly impacted by many factors, most notably the ongoing trade tensions between Russia and Ukraine, the widespread flu outbreak, and the enduring oil crisis. The current economic conditions have led to a multifaceted and challenging business environment. The crude oil market price has experienced a significant increase of over 100%, rising from a low point of $70 per barrel to a high point of $120 per barrel. Based on the anticipated financial projections, India is expected to allocate a substantial amount of $722.54 million to Brazil during the first quarter of the fiscal year 2023-2024. This allocation is a part of their strategic arrangement aimed at procuring oil resources. The United States' crude oil requirements are predominantly met through imports, constituting a significant majority of over 70%. After conducting a meticulous analysis of the data presented in tabular and graphical representations, it becomes apparent that the price of a solitary barrel of oil experienced an atypical downward trajectory. The observed downward trend was initiated on July 14, 2023, with the price at $77.73, and reached its culmination on July 3, 2023, registering a value of $69.69. The performance of the crude oil market holds significant influence over the Indian economy and its socio-economic fabric, as the two are intricately interconnected. As a result, any unfavorable developments in this particular industry possess the capacity to negatively impact productivity levels while concurrently exerting an upward influence on prices. Moreover, it is worth noting that these specific circumstances could potentially lead to a devaluation of the Indian rupee.

Crude Oil (in USD)
Date	Open	High	Low	Close
Jul 03, 2023	70.45	71.77	69.69	69.79
Jul 05, 2023	70.15	72.17	69.9	71.79
Jul 06, 2023	71.8	72.34	70.22	71.8
Jul 07, 2023	71.89	73.92	71.19	73.86
Jul 10, 2023	73.86	74.15	72.67	72.99
Jul 11, 2023	73.19	74.96	72.98	74.83
Jul 12, 2023	74.83	76.15	74.67	75.75
Jul 13, 2023	75.85	77.33	75.32	76.89
Jul 14, 2023	77.16	77.3	75.11	75.42

2. Gold imports

The cultural and economic significance of gold is further amplified by its extensive utilization within the domain of Indian jewelry, thereby contributing to its overall value proposition. During the fiscal years of 2022 and 2023, there was a notable increase in concerns among individuals regarding their insufficient gold holdings to withstand the impending pandemic. The Indian economy has experienced a downturn due to the recent surge in gold prices and increased imports. Consequently, the government has introduced an additional 15% surcharge on gold imports, further augmenting the existing onerous duty. In light of the recent increase in taxes, it is noteworthy to observe the unwavering demand exhibited by buyers, which can largely be attributed to the substantial devaluation of gold. The depreciation is a mitigating factor against the adverse effects of heightened taxation, thereby contributing to a sustained level of market demand.

The graphical and tabular depictions vividly showcase the enduring and incremental trajectory witnessed in gold prices. Based on the current market landscape, it is evident that the median valuation of gold is currently positioned at $1961.04. Our thorough analysis shows that the price of gold has exhibited a downward trend, declining from $1931.89 on July 13 to $1903.20 on July 06 of the subsequent year. The influx of gold into the Indian economy from foreign sources has exhibited a noticeable influence on the trajectory of inflation, resulting in a significant upswing in inflationary indicators. To proactively address inflationary pressures, the Federal Reserve should consider implementing measures to restrict the government's acquisition of gold.

Gold Rate (in USD)
Date	Open	High	Low	Close
Jul 03, 2023	1,917.90	1,929.50	1,917.90	1,921.70
Jul 05, 2023	1,923.50	1,933.90	1,914.70	1,919.60
Jul 06, 2023	1,909.30	1,910.20	1,903.20	1,908.70
Jul 07, 2023	1,913.40	1,934.10	1,913.40	1,926.20
Jul 10, 2023	1,923.60	1,926.10	1,912.30	1,925.00
Jul 11, 2023	1,925.00	1,937.00	1,924.20	1,931.30
Jul 12, 2023	1,932.30	1,958.00	1,932.20	1,956.20
Jul 13, 2023	1,961.10	1,961.10	1,953.00	1,959.20
Jul 14, 2023	1,958.40	1,960.60	1,952.70	1,960.10

3. GDP & Import/Export

The impact of a trade deficit on GDP is subject to the moderation exerted by various factors. The trade balance, which signifies the difference between a country's imports and exports, significantly impacts its currency exchange rate and overall economic well-being. A trade deficit, which denotes an asymmetry in which a country's imports exceed its exports, may potentially yield unfavorable consequences for investors holding the corresponding currency. An economic downturn could result in a contraction of the Gross Domestic Product (GDP).

The visual depiction below provides a comprehensive illustration of the complexities of formulating precise forecasts about trade deficits. From March to July, a notable positive trajectory was observed in the proportion of imports sourced from India.

India: Imports & Exports (in US$ Million)
Date	Export (US$ Million)	Import (US$ Million)
Sep-22	29.7	28.10
Oct-22	24.60	15.90
Nov-22	30.70	21.70
Dec-22	20.40	5.70
Jan-23	29.60	7.50
Feb-23	28.80	10.80
Mar-23	13.10	6.00
Apr-23	7.50	3.10
May-23	7.70	2.00

The infusion of additional capital is crucial to enhance this sector's progress. The trade balance of India exhibited a positive trend in the final quarter of 2022, with trade surpluses observed in both October and December, indicating a favorable trajectory. Despite its abundant resources, India's balance of trade witnessed a significant surge in the deficit, reaching a noteworthy sum of $5.7 million. A conspicuous trade imbalance has persisted throughout the preceding periods, marked by a consistent lag in exports compared to imports. The upward trajectory witnessed in September showcases a promising sign, assuming no unforeseen obstacles or impediments hinder progress.

GDP Rate in India
Date	Rate (%)
Jul-21	20.10
Oct-21	8.40
Feb-22	5.40
Jul-22	13.50
Oct-22	6.30
Jan-23	4.40

To address trade deficits effectively, it is imperative for nations to carefully consider the strategic approach of implementing currency devaluation. There is a potential for a decrease in operational efficiency due to the suboptimal execution of routine tasks. Notwithstanding the currency's depreciation, India's Gross Domestic Product (GDP) demonstrated a commendable upward trajectory, experiencing a substantial increase from 5.4% in February 2022 to 13.5% in July 2022, followed by a subsequent moderation to 6.1% in March 2023. The significant growth of the economy can be attributed to the diligent efforts of the Indian government, thus indicating a positive financial outlook for India. According to the projections put forth by the esteemed Reserve Bank of India (RBI), it is anticipated that there will be a moderation in the pace of economic expansion by 2023. Given the current market conditions, the currency's valuation is expected to exhibit a favorable trajectory over the next three consecutive quarters.

4. Inflation rates

Two key determinants that can exert a substantial impact on the valuation of a nation's currency are its Gross Domestic Product (GDP) and the inflation rate. The annual inflation rate for July exhibited a significant decline, ultimately stabilizing at 6.71%.

India's Inflation rates
Date	Percentage
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
Apr-23	4.70
May-23	4.25
Jun-23	4.81

This metric represents the most favorable observation recorded since the initiation of the current fiscal year in January 2022. Following a notable interest rate of 7.01% observed in June, a subsequent decline to 4.09% has been witnessed. The inflation rate exhibited a significant decrease, registering a drop from 6.1% in January to 4.81% in June within the same fiscal year. The intricate and interdependent relationship between Gross Domestic Product (GDP) and inflation requires a comprehensive examination. It entails discerning the fundamental drivers behind rate disparities, which can be challenging. The market's fluctuations are an inherent outcome of the economy's accelerated growth, resulting in periodic volatility.

US Inflation rates
Date	Percentage
Jun-22	9.10
Jul-22	8.50
Aug-22	8.30
Sep-22	8.20
Oct-22	7.70
Nov-22	7.10
Dec-22	8.00
Jan-23	6.40
Feb-23	6.00
Mar-23	5.00
Apr-23	4.90
May-23	4.00
Jun-23	3.00

The most recent data indicates a significant increase in inflation rates for both the United States and India. In May 2022, the United States witnessed a substantial escalation in the inflation rate, with a notable surge to 9.1%. In response to prevailing market conditions, the Federal Reserve strategically implemented a 75% increase in the repo rate during June. The inflation rate demonstrated a downward trend, experiencing a significant decline to 3.0% in June 2023, marking its lowest point in the past three years. The rupee depreciation signifies a simultaneous appreciation of the US dollar vis-à-vis the Indian economy.

5. Interest rates

In response to the ascending trajectory of the Consumer Price Index (CPI), the Reserve Bank of India (RBI) tactfully implemented a measured course of action by raising the prevailing interest rates from 4.4% to 4.9% in July 2022. In light of the escalating expenses associated with conducting business operations, financial institutions may increase their rates for deposits and loans. Based on the prevailing sentiment among the Indian population, it is expected that an upward trend in interest rates will positively impact the nation's economic landscape. During the fiscal year 2020, India experienced a notable reduction in its population due to the negative impacts arising from the worldwide spread of the coronavirus pandemic, resulting in a discernible decrease of around 4% in its demographic statistics. In August 2022, we observed a slight uptick in the repo rate, increasing from 5.24% to 5.25%. In light of the developments above, it is pertinent to highlight that during September 2022, there was a slight increase of 0.1% in the repo rate. Based on our analysis, the prevailing interest rate, currently standing at 5.25%, is projected to experience an upward trajectory and reach 6.50% by December 2022. The consensus among market participants was that the Reserve Bank of India (RBI) would likely announce a hike in the repo rate after the release of the Union Budget in February.

RBI Bank 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

Through the strategic initiatives implemented by the Reserve Bank of India, the Federal Reserve in the United States has opted to raise interest rates to address the growing inflationary pressures effectively. The repo rate has witnessed a substantial upward trajectory, demonstrating an impressive surge of 75%. In May 2023, the interest rate experienced a notable decline, reaching 5.08%. This downward movement can be attributed to the positive economic environment and reduced inflationary forces. The Federal Reserve's recent decision to increase interest rates is crucial in ensuring the stability and growth of the American economy. The depreciation of the Indian rupee against the US dollar can be attributed to various factors, including economic fundamentals and market dynamics. One such factor is the cultural and linguistic differences between India and the United States, which may impact the exchange rate.

US Fed Interest Rates
Date	Interest Rate
Nov-21	0.08
Dec-21	0.08
Jan-22	0.08
Feb-22	0.08
Mar-22	0.2
Apr-22	0.33
May-22	0.77
Jun-22	1.21
Jul-22	1.58
Aug-22	2.5
Sep-22	3.25
Oct-22	4
Mar-23	4.83
May-23	5.08

6. Foreign and Domestic Investment

An increase in foreign direct investment (FDI) typically corresponds to a commensurate rise in interest rates. From a financial analysis perspective, assessing the situation's benefits and drawbacks is crucial. The Reserve Bank of India has recently announced its strategic goal of enhancing its foreign currency reserves to exert a downward influence on the valuation of the Indian rupee. Based on the Reserve Bank of India's projections, foreign investment in 2022 is expected to witness a significant surge of around $83 billion, surpassing the levels seen in the preceding year. The notable rise in expansion can be primarily ascribed to the substantial upswing in foreign currency sales. Assuming that the Reserve Bank of India's assets exceeds the noteworthy milestone of $100 billion by the conclusion of the fiscal year 2022-2023. Given the prevailing circumstances, we may observe a gradual rupee depreciation.

India's FDI
Date	FDI (US$ Million)
Apr-22	6459
May-22	6152
Jun-22	3978
Jul-22	4971
Aug-22	2376
Sep-22	2974
Oct-22	3013
Nov-22	2411
Dec-22	4411
Jan-23	4056
Feb-23	2850
Mar-23	2382

The chart illustrates the persistent pattern of multinational enterprises' foreign direct investment (FDI) equity acquisitions. During the initial quarter of 2023, the evaluated shares experienced a significant surge in sales, surpassing the projected figures for the subsequent fiscal year. Nevertheless, it is imperative to highlight that the culmination of the fourth quarter witnessed a discernible downturn in sales, amounting to approximately $2,382,000.00. Based on the analysis conducted by financial experts, it is projected that foreign investment will decline due to the favorable trajectory of the Indian economy. Based on the prevailing economic projections, it is anticipated that the Indian economy is poised to experience a notable upward trajectory, potentially materializing in the forthcoming years of 2023 or 2024. The projected upward trend is expected to coincide with a corresponding increase in the valuation of the Indian rupee.

The Indian government has strategically devised and executed a range of initiatives to enhance the rupee's global position. The stabilization of the Indian economy cannot be exclusively attributed to the endeavors of the Reserve Bank of India (RBI) or the Federal Reserve System (Fed) in the United States. Moreover, the synergistic efforts of domestic stakeholders, encompassing corporations, enterprises, and individuals, have exerted a decisive influence in molding this resultant situation. The depreciation of the Indian rupee and the broader economic performance of India have been adversely impacted by many global events and other contributing factors. The regulatory landscape, encompassing governmental entities and the esteemed Reserve Bank of India, is diligently executing strategic measures to reinstate and fortify the foundations of financial stability. By effectively leveraging combined resources and fostering mutually beneficial collaborations, a promising opportunity exists to sustain substantial economic expansion and establish a solid basis for price stability until 2024.