Why is the USD to INR Exchange Rate Up today on 30th June 2023 (2nd half of June 2023)?

Key points:

• The value of the Indian rupee has dropped against the dollar.
• The Federal Reserve of the United States has recently enacted a monetary policy that involves a deliberate upward adjustment of interest rates to mitigate the impact of inflationary pressures.
• The inflation rates in both the United States and India are currently exhibiting a downward trajectory.
• Based on market projections, the Reserve Bank of India (RBI) is expected to implement a 25 basis point interest rate hike in February 2023.
• India's economy exhibited a favorable upward trajectory during the preceding quarter.

According to economic analysts, India's economic growth trajectory is projected to experience a significant transformation beyond the year 2023. Despite the prevailing global economic downturn, it is noteworthy that the economic conditions in the United States have displayed promising signs of improvement. India's Gross Domestic Product (GDP) experienced a notable expansion of 13.5% during the most recent quarter. The rupee maintained a steady valuation. Financial analysts generally tend to favor assessing India's economic growth through annual measurements instead of quarterly ones. The Reserve Bank of India's (RBI) synergistic endeavors with various governmental entities have yielded favorable outcomes for the Indian economy. The recent actions taken by the government, including the increase in interest rates and the implementation of trade restrictions, have had a favorable effect on the economy and currency, resulting in a positive impact.

USD to INR Exchange Rates
Date	Open	High	Low	Close
Jun 16, 2023	81.9127	82.0159	81.8513	81.9127
Jun 19, 2023	81.9148	82.002	81.893	81.9148
Jun 20, 2023	81.9814	82.1648	81.9153	81.9814
Jun 21, 2023	81.9918	82.1273	81.947	81.9918
Jun 22, 2023	81.9415	82.0838	81.8874	81.9415
Jun 23, 2023	81.9193	82.0785	81.9249	81.9193
Jun 26, 2023	81.9848	82.073	81.9431	81.9848
Jun 27, 2023	82.0065	82.0422	81.943	82.0065
Jun 28, 2023	81.9984	82.0855	81.9611	81.9984
Jun 29, 2023	82.0265	82.2125	81.997	82.0265
Jun 30, 2023	82.05	82.057	81.99	82.012

Based on the most recent market data, it is observed that the USD/INR exchange rate currently rests at 82.00. This signifies the overall valuation of a single United States dollar in terms of Indian rupees. In the latter half of the current month, the rupee has demonstrated increased levels of stability compared to the preceding half. The recent market performance of the rupee shows a promising upward trend, indicating its potential for substantial growth within the global economy. The recent volatility in the value of the Indian rupee has exacerbated the prevailing apprehensions surrounding the long-term stability of the Indian economy and its currency. The Indian rupee demonstrated a notable surge, reaching its highest value of 82.16 against the US dollar on June 29, 2023. However, it experienced a subsequent decline, hitting a low point of 81.85 on June 16, 2023. The analyzed asset has demonstrated a 14-day historical volatility with a daily average of 0.052 points. The Indian government, in conjunction with the Reserve Bank of India (RBI), is actively implementing strategic measures to mitigate the rupee depreciation. Central banks worldwide, including the esteemed Federal Reserve, have implemented a reduction in interest rates in response to the prevailing circumstances of heightened 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 predominantly originate from the United Arab Emirates, Russia, and Saudi Arabia, constituting more than 80% of the overall implications. Nevertheless, it is worth noting that India's ports currently account for a modest 10% share of the global trade market. India has effectively implemented a strategic approach to enhance the diversification of its crude oil imports by bolstering its procurement from critical sources such as Gabon, Colombia, Canada, Nigeria, and Iraq. The strategic decision to undertake this move is driven by minimizing the potential risks from excessive dependence on a restricted pool of oil producers. The prevailing global economic environment has witnessed the influence of various factors, notably the trade tensions between Russia and Ukraine, the pervasive flu outbreak, and the persistent oil crisis. The prevailing circumstances have given rise to a complex and demanding commercial landscape. The crude oil market price has witnessed a substantial surge of more than 100%, surging from a trough of $70 per barrel to a peak of $120 per barrel. Based on the projected figures, India is anticipated to allocate $722.54 million to Brazil during the first quarter of the fiscal year 2023-2024 as part of their arrangement for procuring oil. Imports account for over 70% of the United States crude oil requirements.

Upon careful examination of the provided data in both tabular and graphical formats, it becomes evident that the price of a single barrel of oil underwent an unusual downward trajectory. Specifically, the observed decline commenced on June 22, 2023, when the price stood at $72.72, and culminated on June 28, 2023, with a recorded value of $67.05. The Indian economy and its socio-economic fabric are intricately intertwined with the performance of the crude oil market. Consequently, any adverse developments in this sector have the potential to exert downward pressure on productivity levels while simultaneously exerting an upward influence on prices. Furthermore, such circumstances may also contribute to a depreciation of the Indian rupee.

Crude Oil (in USD)
Date	Open	High	Low	Close
Jun 16, 2023	70.55	71.89	69.95	71.78
Jun 20, 2023	71.45	72.09	69.65	70.5
Jun 21, 2023	70.9	72.72	70.8	72.53
Jun 22, 2023	72.43	72.65	68.93	69.51
Jun 23, 2023	69.53	69.65	67.35	69.16
Jun 26, 2023	69.84	70.11	68.71	69.37
Jun 27, 2023	69.49	70.15	67.5	67.7
Jun 28, 2023	68.01	69.73	67.05	69.56
Jun 29, 2023	69.25	70.6	68.93	69.86
Jun 30, 2023	69.82	70.07	69.59	69.97

2. Gold imports

The cultural and economic significance of gold is further enhanced by its widespread utilization in the realm of Indian jewelry. Throughout the fiscal years of 2022 and 2023, considerable apprehension emerged among individuals about their inadequate holdings of gold to endure the imminent pandemic. The Indian economy has declined due to the recent escalation in gold prices and imports. As a result, the government has implemented a supplementary 15% increase in the already burdensome duty on gold imports. Despite the recent tax hike, the demand from buyers has displayed remarkable resilience, primarily attributed to the significant depreciation in the value of gold. This depreciation effectively offsets the impact of the increased taxation, resulting in a relatively stable market demand.

The visual representations provided, namely the chart and table, illustrate the sustained and progressive trajectory observed in the prices of gold. Based on prevailing market conditions, it can be observed that the median valuation of gold stands at $1926.04. Our comprehensive analysis shows that the price of gold has experienced a decline, moving from $1962.90 on June 16 to $1892.50 on June 29 of the forthcoming year. The observed inflow of gold into the Indian economy from foreign sources has demonstrated a discernible impact on inflationary trends, leading to a substantial surge in inflation rates. To effectively manage inflationary pressures, it would be prudent for the Federal Reserve to contemplate limiting the government's procurement of gold.

Gold Rate (in USD)
Date	Open	High	Low	Close
Jun 16, 2023	1,961.40	1,962.90	1,953.50	1,958.40
Jun 20, 2023	1,958.60	1,958.60	1,931.30	1,935.50
Jun 21, 2023	1,935.60	1,936.80	1,920.00	1,933.30
Jun 22, 2023	1,920.00	1,921.00	1,912.10	1,912.70
Jun 23, 2023	1,918.70	1,932.50	1,918.70	1,919.10
Jun 26, 2023	1,922.90	1,928.50	1,922.50	1,923.70
Jun 27, 2023	1,927.00	1,929.40	1,914.00	1,914.00
Jun 28, 2023	1,912.30	1,912.30	1,912.30	1,912.30
Jun 29, 2023	1,909.90	1,909.90	1,892.50	1,909.20
Jun 30, 2023	1,916.40	1,917.60	1,914.80	1,916.60

3. GDP & Import/Export

The influence of a trade deficit on GDP is contingent upon the moderation exerted by many factors. The trade balance, representing the disparity between a nation's inbound and outbound trade activities, holds substantial influence over its currency valuation and overall economic prosperity. A trade deficit, characterized by an imbalance where a nation's imports surpass its exports, can potentially have unfavorable repercussions for holders of the respective currency. There exists a potential for a contraction in the Gross Domestic Product (GDP).

The graphical representation below elucidates the intricacies of formulating accurate predictions about trade deficits. From March to July, a significant upward trend was observed in the percentage of imports originating from India.

India: Imports & Exports (in US$ Million)
Date	Export (US$ Million)	Import (US$ Million)
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
Jan-23	29.60	7.50
Feb-23	28.80	10.80
Mar-23	13.10	6.00
Apr-23	7.50	3.10

The additional capital infusion is imperative to bolster the advancement within this specific sector. The trade balance of India demonstrated a favorable trajectory during the concluding quarter of 2022, as evidenced by the emergence of trade surpluses in October and December. Despite ample resources, India's balance of trade experienced a notable increase in the deficit, amounting to $8.7 million. Throughout previous periods, it is evident that a significant disparity in trade has persisted, characterized by exports consistently falling behind imports. The observed positive change witnessed in September presents a promising indication, provided that no unforeseen obstacles or impediments are present.

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 effectively tackle trade deficits, nations must contemplate the strategic option of currency devaluation. There is a possibility of a decline in operational efficiency due to the performance of routine tasks. Despite the currency's depreciation, India's Gross Domestic Product (GDP) exhibited a commendable upward trend, showcasing a significant surge from 5.4% in February 2022 to 13.5% in July 2022, followed by a subsequent moderation to 6.1% in March 2023. The considerable augmentation of the economy can be ascribed to the assiduous endeavors of the Indian government, thereby signifying a favorable financial prognosis for India. Based on the projections provided by the Reserve Bank of India (RBI), there is expected to be a deceleration in economic growth by 2023. Based on the prevailing market conditions, it is anticipated that the currency's valuation is poised to experience a positive trajectory over the forthcoming three consecutive quarters.

4. Inflation rates

The valuation of a nation's currency can be significantly influenced by two crucial factors: the GDP and the inflation rate. The July annual inflation rate experienced a notable decrease, settling at 6.71%.

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

This figure marks the most favorable reading observed since the year's commencement in January 2022. After experiencing a special rate of 7.01% in June, there has been a subsequent decrease to 4.09%. The inflation rate experienced a notable drop, declining from 6.1% in January to 4.25% in May of the same fiscal year. The intricate and interconnected relationship between GDP and inflation necessitates a nuanced analysis, making identifying the underlying factors driving rate disparities a formidable task. The market's oscillations are an inevitable consequence of the economy's rapid expansion, leading to intermittent instability.

US Inflation rates
Date	Percentage
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
Feb-23	6.00
Mar-23	5.00
Apr-23	4.90
May-23	4.00

The latest data reveals a notable uptick in inflation rates for both the United States and India. In May 2022, the United States experienced a significant surge in the inflation rate, reaching 9.1%. As a result, the Federal Reserve responded by deciding to raise the repo rate by 75% in June. The inflation rate exhibited a downward trajectory, reaching a notable decrease to 4.0% in May 2023, representing its most subdued level observed within the preceding three-year period. The devaluation of the rupee indicates a relative strengthening of the US dollar against the Indian economy.

5. Interest rates

To address the upward trajectory of the Consumer Price Index (CPI), the Reserve Bank of India (RBI) implemented a measured response by increasing the prevailing interest rates from 4.4% to 4.9% in July 2022. Given the mounting costs of conducting business operations, financial institutions will likely opt to raise their rates for deposits and loans. Based on prevailing sentiment within the Indian population, an upward trajectory in interest rates is anticipated to exert a favorable influence on the economic terrain of the nation. In the fiscal year 2020, India witnessed a significant contraction in its population due to the adverse effects stemming from the global outbreak of the coronavirus pandemic, leading to a noticeable decline of approximately 4% in its demographic figures. During August 2022, a marginal increase was observed in the repo rate, which rose from 5.24% to 5.25%. Following the preceding events, it is noteworthy to mention that in September 2022, a marginal uptick of 0.1% was observed in the repo rate. The current prevailing interest rate is 5.25%, but our analysis indicates it is anticipated to increase to 6.50% by December 2022. Market participants widely expected that the Reserve Bank of India (RBI) would announce an increase in the repo rate following the unveiling 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

In line with the strategic measures undertaken by the Reserve Bank of India, the Federal Reserve in the United States has decided to increase interest rates to tackle the mounting inflationary forces effectively. The repo rate has experienced a significant upward movement, exhibiting a remarkable surge of 75%. In May 2023, the interest rate observed a downward trajectory, settling at 5.08%, primarily driven by favorable economic conditions and decreased inflationary pressures. The Federal Reserve's recent decision to raise interest rates is a pivotal determinant in safeguarding the prosperity of the American economy. The depreciation of the Indian rupee against the US dollar can be attributed to the widening cultural and linguistic divergence between India and the United States.

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 upward trend in foreign direct investment (FDI) generally leads to a proportional escalation in interest rates. From a financial analysis standpoint, evaluating the situation's advantages and disadvantages is imperative. The Reserve Bank of India has recently unveiled its strategic objective of augmenting its foreign currency reserves to exert downward pressure on the valuation of the Indian rupee. According to the Reserve Bank of India's projections, foreign investment in 2022 is anticipated to experience a notable increase of approximately $83 billion, surpassing the levels observed in the previous year. The noteworthy increase in growth can be primarily attributed to the significant rise in foreign currency sales. Suppose the Reserve Bank of India's assets surpass the $100 billion threshold by the culmination of the fiscal year 2022-2023. In that case, it is plausible that we could witness a progressive devaluation of the rupee.

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 shows the enduring trend of multinational enterprises' foreign direct investment (FDI) equity acquisitions. In the first quarter of 2023, the shares under consideration witnessed a notable sales increase, exceeding the anticipated figures for the following fiscal year. However, it is worth noting that by the conclusion of the fourth quarter, there was a noticeable decline in sales, reaching approximately $2,382,000.00. According to financial analysts, there is an anticipated decrease in foreign investment in light of the positive trajectory of the Indian economy. Based on the prevailing forecasts, it is expected that the Indian economy will undergo a significant upward trajectory, potentially manifesting in the years 2023 or 2024. This positive trajectory is anticipated to be accompanied by a commensurate appreciation in the value of the Indian rupee.

The Indian government has strategically implemented a series of initiatives to bolster the rupee's international standing. The stabilization of the Indian economy cannot be solely ascribed to the efforts of the Reserve Bank of India (RBI) or the Federal Reserve System (Fed) in the United States. Furthermore, the collaborative endeavors of domestic entities, including organizations, businesses, and individuals, have played a pivotal role in shaping this outcome. The devaluation of the Indian rupee and the overall economic performance of India have been negatively influenced by many global events and other contributing factors. The regulatory bodies, including the government and the Reserve Bank of India, are implementing strategies to restore financial stability. Through the strategic utilization of pooled resources and the cultivation of synergistic partnerships, the potential for perpetuating robust economic growth and establishing a foundation of price stability until 2024 can be realized.