Why is the USD to INR Exchange Rate up today on 15th December 2022 (1st half of December 2022)?

Key points:

• The value of one US dollar relative to one Indian rupee is rising.
• Interest rates in the United States have been raised to 4% by the Federal Reserve in an effort to curb inflation.
• The inflation rates in India and the United States both seem to be trending downward.
• GDP in India has fallen in the most recent quarter.

Although economies around the world are struggling, those in the United States are showing signs of improvement.Despite India's gross domestic product increasing by 13.5 percent last month, the rupee has not risen. Financial experts are generally bullish on India's prospects. Of course, quarterly growth isn't enough; annual expansion requires the trend to continue unabated throughout the year. With input from the Indian government and other organizations, the Reserve Bank of India (RBI) has developed plans and projects to improve the country's economy. The currency and economy have benefited from the government's decision to increase interest rates and restrict trade.

USD to INR Exchange Rates
Date	Open	High	Low	Close
01-Dec-22	81.31	81.37	80.99	81.31
02-Dec-22	81.16	81.62	81.08	81.16
05-Dec-22	81.42	81.90	81.19	81.42
06-Dec-22	81.90	82.60	81.69	81.90
07-Dec-22	82.37	82.74	82.20	82.37
08-Dec-22	82.25	82.54	82.24	82.25
09-Dec-22	82.28	82.51	82.07	82.28
12-Dec-22	82.41	82.72	82.36	82.41
13-Dec-22	82.64	82.91	82.37	82.64
14-Dec-22	82.40	82.71	82.40	82.40
15-Dec-22	82.51	83.04	82.41	82.51

According to our research, one US dollar is equivalent to 82.16 Indian rupees. After a relatively stable first half of October, prices have begun to rise. It demonstrates that the rupee has the potential for increased success. On December 01, 2022, the rupee hit an all-time high of 80.99. However, by December 15, 2022, the value of the rupee dropped to an all-time low of 83.08. We are concerned about the future of India's economy and currency in light of the recent fluctuations in the exchange rate. Over the past two weeks, the currency's value has fluctuated by an average of 0.363 rupees per day. There may be room for improvement if the difference is large enough. The RBI, the central bank, and the government all work together to support a rising currency value. Remember that it will take some time before you see any progress. The US Federal Reserve has taken similar measures to prevent inflation from skyrocketing.

Several parts must work well for the currency to be solid and stable. 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

More than 80% of India's crude oil needs are typically met by countries like the United Arab Emirates (UAE), Russia, and Saudi Arabia. Only ten to fifteen percent of India's trade goes through its ports. However, India has recently expanded its crude oil imports to include supplies from Gabon, Colombia, and Canada. The unique crises of the war between Russia and Ukraine, the pandemic, and the global oil deficit have all contributed to the rise in trade barriers. A barrel of oil hit a record high of $120. Formerly, the barrel price was closer to $70, but now it's down to around $80. As of the end of the second quarter of 2022-2023, India had paid Brazil $722.54 million for an oil shipment. The United States imports over 70% of its crude oil requirements.

Prices have been decreasing, as shown in the table and graph below. A barrel of oil cost $83.34 on December 1, 2022, and $70.08 on December 9, 2022. Since last month, the price has increased. It would be impossible to live without crude oil, which is used in manufacturing, transportation, and many other processes. This expense may lead to less labor output, higher prices, and a depreciation of the Indian rupee.

Crude Oil (in USD)
Date	Open	High	Low	Close
01-Dec-22	80.40	83.34	79.93	81.22
02-Dec-22	81.47	82.22	79.65	79.98
05-Dec-22	79.99	82.72	76.77	76.93
06-Dec-22	77.35	77.88	73.41	74.25
07-Dec-22	74.55	75.38	71.75	72.01
08-Dec-22	72.38	75.44	71.12	71.46
09-Dec-22	71.85	72.92	70.08	71.02
12-Dec-22	71.79	73.99	70.25	73.17
13-Dec-22	73.29	76.37	73.21	75.39
14-Dec-22	75.27	77.75	74.90	77.28
15-Dec-22	77.37	77.77	75.33	76.11

2. Gold imports

Gold is the most popular metal for jewelry in India, which has given the precious metal a special significance in the hearts of the country's citizens. People in 2022 finally started putting away gold after failing to do so during the pandemic. Inflation rises, and the Indian economy suffers when India imports more gold. The government's response was to increase the tax on gold imports from 10.75% to 15%. However, low prices have offset the higher taxes, and people continue to buy gold despite the price increase.

As seen in the table and graph below, gold prices have been falling. At its current price of $1789.21, an ounce of gold is more expensive than it has been in the last two weeks of November on average. From December 5-13, 2022, gold fluctuated in price between $1819.80 and $1764.30. More gold imports from abroad are a direct cause of inflation. The amount of gold the government can acquire should be strictly regulated.

Gold Rate (in USD)
Date	Open	High	Low	Close
01-Dec-22	1,768.70	1,803.70	1,768.70	1,801.10
02-Dec-22	1,802.00	1,802.30	1,779.40	1,795.90
05-Dec-22	1,795.70	1,808.00	1,764.30	1,767.40
06-Dec-22	1,768.60	1,779.40	1,767.90	1,769.30
07-Dec-22	1,769.30	1,790.30	1,769.30	1,785.50
08-Dec-22	1,782.00	1,790.90	1,782.00	1,788.70
09-Dec-22	1,794.90	1,804.30	1,791.10	1,798.10
12-Dec-22	1,787.30	1,793.90	1,777.70	1,780.50
13-Dec-22	1,780.70	1,819.80	1,780.50	1,813.90
14-Dec-22	1,810.80	1,812.80	1,797.90	1,807.50
15-Dec-22	1,801.00	1,801.00	1,774.80	1,777.20

3. GDP & Import/Export

There are many connections between the trade gap and GDP. When a country changes what it buys and sells, its currency and economy react accordingly. The worth of cash decreases when imports exceed exports and increases in the opposite direction. The holders of a currency suffer when its value decreases because they have less purchasing power. In turn, this will lead to a decline in GDP.

The following graph illustrates how challenging it is to foresee the size of the trade gap. Between March and July, India saw a significant increase in imports. On the bright side, though, things are improving. In October of 2022, exports surpassed imports in value. This new surplus has increased India's trade deficit by $8.7 million. The disparity between exports and imports has always stood out more. Nonetheless, September's positive delta is promising.

India: Imports & Exports (in US$ Million)
Date	Export (US$ Million)	Import (US$ Million)
Feb-22	19.40	25.00
Mar-22	29.60	25.20
Apr-22	25.10	46.10
May-22	32.20	52.70
Jun-22	24.60	45.50
Jul-22	20.20	22.30
Aug-22	24.30	27.10
Sep-22	29.7	28.10
Oct-22	24.60	15.90

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

Since more goods entered the country than were left, the value of the local currency decreased. Things don't function as well as a result. The GDP increased from 5.4% in February 2022 to 13.5% in July 2022, despite a decline in the currency's value. The Indian economy is expanding at an unprecedented rate. The Indian government and the Reserve Bank of India worked toward this goal, which finally materialized. The RBI predicts a slowing or even quickening of economic growth by 2023. You can learn a lot about the state of the Indian economy this way. This pattern must persist for three consecutive quarters before the currency appreciates.

4. Inflation rates

A currency's value can increase or decrease depending on the inflation rate. A decrease in GDP leads to higher inflation. In July 2022, annual inflation was 6.71%, down from June 2022's 7.01%. But by October of that year, it had dropped to 6.7%. It's not the same as the robust expansion of the economy. Given the interconnected nature of these factors, pinpointing the origin of this difference is problematic.

India's Inflation rates
Date	Percentage
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
Jul-22	6.71
Aug-22	7.00
Sep-22	7.41
Oct-22	6.77

US Inflation rates
Date	Percentage
Oct-21	6.20
Nov-21	6.80
Dec-21	7.00
Jan-22	7.50
Feb-22	7.90
Mar-22	8.50
Apr-22	8.30
May-22	8.60
Jun-22	9.10
Jul-22	8.50
Aug-22	8.30
Sep-22	8.20
Oct-22	7.70

Both India and the United States have inflation issues. In May 2022, the US inflation rate reached a new all-time high of 9.1%. The Federal Reserve increased the repo rate by 75 basis points to slow inflation. During October 2022, inflation fell to a three-year low of 7.7 percent. The United States performed better in these areas than India, as evidenced by the currency exchange rates.

5. Interest rates

In July 2022, the RBI increased repo rates by 50 basis points to curb inflation. Interest rates increased from 4.4% to 4.9%. Rates charged by banks for loans and deposits rise in tandem with increases in the repo rate. Raising interest rates is widely expected to stimulate the Indian economy by attracting more significant investment capital. In 2020, the record low for speed was 4%, all because of the coronavirus epidemic. Since interest rates are directly tied to the repo rate, the increase in the repo rate in August 2022 caused rates to rise to 5.4%. Nothing has altered since then. Conventional wisdom holds that the Reserve Bank of India (RBI) will increase repo rates once more this year.

RBI Bank 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%
Aug -22	5.40%

The Reserve Bank of India and the Federal Reserve of the United States increased interest rates to combat inflation. There was a big shift in the repo rate, up 75%. Beginning in October of 2022, the interest rate is now 4%. This increase has resulted in a lower inflation rate. The Federal Reserve is widely expected to maintain its rate-hiking policy at least through the time it deems necessary to ensure the stability of the U.S. economy. The Indian rupee's weakness against the dollar can be largely attributed to the vast cultural and linguistic gaps between India and the United States

US Fed Interest Rates
Date	Interest Rate
Aug-21	0.09
Sep-21	0.08
Oct-21	0.08
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	4.00

6. Foreign and Domestic Investment

Increases in interest rates are associated with a rise in FDI (foreign direct investment). Like any other situation, this one will have its advantages and disadvantages. If the RBI buys more foreign currency, the value of the rupee will fall. The RBI's decision to sell more foreign currency raises the value of the rupee; roughly $83 billion will be invested abroad in 2021 and 2022. In the fiscal year 2022-23, the RBI will receive more than $100 billion in assets. It may portend further depreciation of the rupee.

India's FDI
Date	FDI (US$ Million)
Aug-21	6233
Sep-21	4505
Oct-21	3719
Nov-21	4390
Dec-21	3911
Jan-22	6388
Feb-22	4617
Mar-22	4593
Apr-22	6459
May-22	6152
Jun-22	3978

Below is a chart illustrating how FDI equity inflows can fluctuate at different times. The incoming sum increased from March to April but dropped to $3,978,000,000 by June 2022. Foreign direct investment (FDI) into India is expected to decline until the economy recovers. In 2023 or 2024, India's economy and currency will grow stronger and progress more quickly.

According to India's minister of finance, "There has been an increase in the dollar's value. The rupee will not lose value." Following what has been said above, it follows that the second sentence is correct. Each country's economy relies on the efforts of the RBI and the Fed. The value of the Indian rupee and the Indian economy is sensitive to various factors occurring outside India. Examining and evaluating numerous factors, most of which are interrelated, is required to pinpoint the source of poor performance. However, the government and the Reserve Bank of India are taking necessary measures to get things back on track. If we all pull together, we can increase the chances of sustained economic growth and currency stability until 2023.