Why is the USD to INR Exchange Rate Down today on 28th February 2023 (2nd half of February 2023)?

Key points:

• The rupee is rising against the US dollar.
• To reduce inflation in the United States, the Federal Reserve has raised interest rates to 4%.
• Both the US and Indian inflation rates are falling.
• RBI is expected to increase the interest rate by 25 bps in February 2023.
• An economic slowdown was observed in India during the most recent quarter.

Many economists think the economy will grow in a new way after 2023. Even though the world economy is weak, the American economy is improving. India's GDP grew by 13.5% from the previous quarter, but the rupee's value didn't change. Experts agree that India's economy should grow once a year, not every three months. The Reserve Bank of India (RBI) has worked with other government agencies to help improve the Indian economy. The currency and economy have benefited from the government's decision to raise interest rates and limit trade.

USD to INR Exchange Rates
Date	Open	High	Low	Close
16-Feb-23	82.74	82.91	82.59	82.74
17-Feb-23	82.70	82.86	82.70	82.70
20-Feb-23	82.76	82.77	82.62	82.76
21-Feb-23	82.70	82.89	82.67	82.70
22-Feb-23	82.86	83.00	82.78	82.86
23-Feb-23	82.84	82.90	82.56	82.84
24-Feb-23	82.62	83.01	82.61	82.62
27-Feb-23	82.92	83.08	82.63	82.92
28-Feb-23	82.65	82.75	82.56	82.65

One U.S. dollar is equal to 82.77 Indian rupees right now. Prices were more stable in the second half of January than in the first half of this month. It shows how far the rupee has come and how it has the potential to be known around the world. On February 27, 2023, one rupee was worth 83.08, a new all-time high. On February 23, 2023, one rupee was worth an all-time low of 82.56. The recent changes in the value of the Indian rupee make us worry about the Indian economy and currency in the long run. Over the past two weeks, the average daily change has been 0.028 points. India's central bank, the Reserve Bank of India (RBI), works with the government to stabilize the rupee's value. Keep in mind that things may stay the same for a while. Along with the U.S. Federal Reserve, many other central banks worldwide have cut interest rates in response to inflation.

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

Countries like the United Arab Emirates (UAE), Russia, and Saudi Arabia usually meet more than 80% of India's crude oil needs. But India's ports only handle about 10% of its trade. Gabon, Colombia, and Canada are now giving India crude oil along with Nigeria and Iraq, which have been giving it oil for a long time. Trade barriers are increasing because Russia and Ukraine are still in a trade war, a global flu epidemic, and a global oil crisis. The price of a barrel of crude oil has reached a new high of $120. A barrel of oil has gone down from $70 to $80. By the end of the second quarter of 2022-2023, India will have paid Brazil $722.54 million for Brazilian oil. More than 70% of US crude oil comes from outside the country.

Prices have decreased recently, as shown in the table and graph below. A barrel of oil rose by $19 between February 16 ($79.54) and February 22 ($73.95), 2023. Since the beginning of the month, the price has gone up. Our economy and way of life depend on crude oil from today. There could be a drop in productivity at work, prices could go up, and the value of the Indian rupee could go down.

Crude Oil (in USD)
Date	Open	High	Low	Close
16-Feb-23	78.54	79.54	77.92	78.49
17-Feb-23	78.07	78.25	75.06	76.34
21-Feb-23	76.53	77.51	75.69	76.16
22-Feb-23	76.11	76.55	73.80	73.95
23-Feb-23	73.92	75.99	73.83	75.39
24-Feb-23	75.60	76.63	74.09	76.32
27-Feb-23	76.42	76.82	74.99	75.68
28-Feb-23	75.76	77.83	75.55	77.05

2. Gold imports

Gold has much symbolic meaning in India because it is often used to make jewelry. The panic that followed was directly caused by the fact that people in 2022 didn't save enough gold before the pandemic. As inflation increases and more gold imports, the Indian economy is in trouble. The government's answer was to raise the already high tax of 10.75% on gold imports by 15%. People still buy gold even though taxes have increased because the low prices make up for the increase.

The table and graph below show how gold prices have gone up. At $1829.90, gold is more expensive than the average price for the last two weeks of January. Between February 16 and February 28, 2023, the cost of gold went between $1843.70 and $1808.8. When gold from other countries is brought in, inflation follows quickly. The Federal Reserve should limit how much gold governments can buy to keep inflation in check.

Gold Rate (in USD)
Date	Open	High	Low	Close
16-Feb-23	1,838.60	1,843.70	1,827.20	1,842.00
17-Feb-23	1,827.40	1,842.20	1,818.40	1,840.40
21-Feb-23	1,842.60	1,843.00	1,833.00	1,833.00
22-Feb-23	1,835.70	1,836.20	1,825.10	1,832.00
23-Feb-23	1,826.40	1,827.50	1,818.00	1,818.00
24-Feb-23	1,808.80	1,808.80	1,808.80	1,808.80
27-Feb-23	1,811.60	1,817.50	1,808.90	1,817.00
28-Feb-23	1,808.10	1,830.00	1,808.10	1,828.90

3. GDP & Import/Export

The trade deficit's effect on GDP can be seen differently and is affected by several other things. How much a country buys and sells can affect the value of its currency and the health of its economy. When there are more imports than exports, the value of a currency goes down, and when there are more exports than imports, the value goes up. When the value of a currency goes down, those who hold it have a hard time. GDP will go down because of this.

India: Imports & Exports (in US$ Million)
Date	Export (US$ Million)	Import (US$ Million)
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
Nov-22	30.70	21.70
Dec-22	20.40	5.70

The following chart shows how hard it is to predict the trade deficit. The rise in the share of imports from India from March to July was especially interesting.

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

When a country has a trade deficit, it has to devalue its currency. It hurts how fast and easy it is to do everyday things. Even though the currency's value decreased, GDP went from 5.4% in February 2022 to 13.5% in July 2022. But in January 2023, it went down to 4.4%. The growth of India's economy has been nothing short of amazing. The plan's success is due to the work of the Indian government. The RBI thinks that growth will slow down by 2023. From this, you can learn much about the Indian economy and its future. After this trend has been going on for three calendar quarters, the currency's value will increase.

4. Inflation rates

If the GDP goes down and inflation goes up, the value of a currency may go up or down. In July, the annual inflation rate was 6.71 percent, the lowest since January 2022, and less than 7.01 percent in June. In January of that year, the rate was 6.1%, but it was 6.52% in January the following year. Given how much the economy has grown, that can only happen sometimes. Since these factors are all connected, finding a single cause for this difference is often challenging.

India's Inflation rates
Date	Percentage
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
Nov-22	5.88
Dec-22	5.72
Jan-23	6.52

US Inflation rates
Date	Percentage
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
Nov-22	7.10
Dec-22	8.00
Jan-23	6.40

In the past few years, the United States and India have had a lot of inflation. In May 2022, inflation in the United States hit a new record high of 9.1%. The Federal Reserve raised the repo rate by 75 basis points to stop prices from going up. In January 2023, inflation was 6.4%, the lowest level in three years. When measured against the Indian rupee, the United States did better than India.

5. Interest rates

The Reserve Bank of India raised the repo rate by 50 basis points in July 2022. This was done to lower inflation. The rate of interest went up from 4.4% to 4.9%. If the repo rate increases, banks will charge more for deposits and lend at higher rates to cover the cost. Most people in India agree that raising interest rates would benefit the economy. In 2020, a coronavirus pandemic killed 4% of the population at the fastest rate ever. In August 2022, the repo rate went from 5.24 percent to 5.25 percent, which led to a gain of 0.1% in September. In December 2022, the rate will be changed, and the new rate will be 6.50%. Most people think that the Reserve Bank of India (RBI) will raise the repo rate again after the Union Budget is shown 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

Prices are increasing, so both the Reserve Bank of India and the Federal Reserve of the United States have raised interest rates. The repo rate went up by 75%, which is crazy. The interest rate is 4% as of October 2022. Since things are getting better, inflation has also gone down. Interest rates are likely to keep going up as long as the Federal Reserve thinks it's essential to do so to keep the U.S. economy strong, which is a widely held belief. The main reason for the fall of the Indian rupee against the U.S. dollar is that the cultural and linguistic gap between India and the U.S. is getting bigger.

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

When interest rates go up, the amount of foreign direct investment (FDI) goes up (foreign direct investment). The pros and cons of this situation would be the same as those of any other problem. The Reserve Bank of India (RBI) hopes to bring down the value of the rupee by buying more foreign currency. The RBI's decision to sell more foreign currency, which raised the value of the rupee, will probably lead to about $83 billion more being invested abroad in 2022 than in 2021. By the end of the 2022-23 fiscal year, the RBI's assets will be worth more than $100 billion. It could be the first step in a long, slow drop in the rupee value.

India's FDI
Date	FDI (US$ Million)
Jan-22	6388
Feb-22	4617
Mar-22	4593
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

The graph below shows that companies that make foreign direct investments (FDI) tend to invest in stocks in cycles. Sales went up from March to April 2022, but by December 2022, they were back down to around $4,411,000.00. As India's economy improves, foreign investment will likely decrease even more. The Indian economy and the rupee's value will significantly improve in 2023 or 2024.

The Indian Finance Minister Says, "The dollar's worth went up. It won't change the value of the rupee." It makes sense to say the second sentence. Few groups are as good as the Reserve Bank of India (RBI) in India and the Federal Reserve System (Fed) in the United States at keeping the economy stable. The value of the rupee and the Indian economy are affected by what happens in the rest of the world. It looks at a wide range of factors, many of which are linked, to figure out why performance is terrible. But the government and the Reserve Bank of India are taking steps to bring things back under control. Together, we can make it more likely that the economy will keep growing and the currency will stay stable until 2023.