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

Key points:

• The value of the Indian rupee has dropped against the dollar.
• The U.S. Federal Reserve has raised interest rates to 5% in an effort to slow inflation.
• Both the US and India are seeing declining inflation rates.
• The market expects a rate hike of 25 basis points from the Reserve Bank of India (RBI) in February 2023.
• There was an uplift in India's economy last quarter.

Economists predict that India's pattern of economic growth will shift after 2023. Despite a worldwide slump, the economy in the United States has shown signs of improvement. India's GDP increased by 13.5% in the most recent quarter, but the value of the rupee remained unchanged. Measurements of India's economic growth on an annual basis rather than quarterly are preferred by experts. The Indian economy has benefited from the RBI's ability to work in tandem with other government agencies. As a result of the government's decision to raise interest rates and restrict trade, the economy, and the currency have improved.

USD to INR Exchange Rates
Date	Open	High	Low	Close
May 16, 2023	82.27	82.31	82.16	82.27
May 17, 2023	82.30	82.45	82.25	82.30
May 18, 2023	82.45	82.79	82.34	82.45
May 19, 2023	82.73	82.95	82.64	82.73
May 22, 2023	82.90	82.91	82.73	82.90
May 23, 2023	82.83	82.88	82.76	82.83
May 24, 2023	82.89	82.94	82.57	82.89
May 25, 2023	82.71	82.81	82.64	82.71
May 26, 2023	82.74	82.81	82.53	82.74
May 29, 2023	82.57	82.74	82.51	82.57
May 30, 2023	82.58	82.78	82.53	82.58
May 31, 2023	82.6839	82.7526	82.6201	82.6839

The current exchange rate for one U.S. dollar is 82.02 Indian rupees. The second half of this month has seen more stability in the rupee than the first. It demonstrates the progress and promise of the rupee on the global market. Recent swings in the value of the rupee have exacerbated existing concerns about the long-term health of the Indian economy and currency. The highest value of the rupee was on May 19, 2023, at 82.95, and the lowest was on May 16, 2023, at 82.16. It has fluctuated by an average of 0.052 points per day over the past 14 days. The Indian government and the RBI are actively working to prevent a devaluation of the rupee. The Federal Reserve and other central banks worldwide have reduced interest rates in response to rising inflation.

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

Even though the United Arab Emirates, Russia, and Saudi Arabia supply more than eighty percent of India's crude oil imports, only about ten percent of global trade moves through India's ports. India has increased its crude oil imports from Gabon, Colombia, Canada, Nigeria, and Iraq to diversify its supply and reduce its reliance on a small number of oil producers. Global events like the trade war between Russia and Ukraine, the global flu epidemic, and the oil crisis have made doing business more difficult. The price of crude oil has more than doubled from its low of $70 per barrel to its high of $120 per barrel. India is projected to pay Brazil $722.54 million in the first quarter of 2023-2024 for oil. The United States imports over 70% of its crude oil needs.

As seen in the table and graph below, the price of a barrel of oil fell from $74.73 on May 24 to $70.04 on May 31 of 2023. There could be a decrease in productivity at work, higher prices, and a devaluation of the Indian rupee as a result, given the importance of crude oil to the Indian economy and way of life.

Crude Oil (in USD)
Date	Open	High	Low	Close
May 16, 2023	71.32	71.79	70.45	70.86
May 17, 2023	70.6	73.26	70.04	72.83
May 18, 2023	72.75	72.87	71.42	71.86
May 19, 2023	71.94	73.4	71.03	71.55
May 22, 2023	71.7	72.36	70.55	71.99
May 23, 2023	72.1	73.79	71.71	72.91
May 24, 2023	73.77	74.73	73.13	74.34
May 25, 2023	74.21	74.37	70.98	71.83
May 26, 2023	71.89	73.05	71.49	72.67
May 30, 2023	73.23	73.55	69.02	69.46
May 31, 2023	69.62	69.69	67.03	68.09

2. Gold imports

The widespread use of gold in Indian jewelry increases the precious metal's cultural and economic value. In 2022 and 2023, people began to worry that they didn't have enough gold to weather the coming pandemic. India's economy has taken a hit from the recent rise in gold prices and imports. As a result, the government has increased the already prohibitive gold import tax by another 15%. Buyers have persisted despite the increase in taxation because the falling value of gold more than makes up for it.

Gold prices are displayed in a chart and table below, demonstrating their steady ascent. The median price of gold right now is $1967.43. This is better than the last two weeks of March. That year, we anticipate that gold will cost $1988.40 on May 16 and $1931 on May 30. When gold floods into India from abroad, inflation rates often skyrocket. The Federal Reserve may want to limit gold purchases by the government if it is serious about taming inflation.

Gold Rate (in USD)
Date	Open	High	Low	Close
May 16, 2023	1,988.40	1,988.40	1,988.40	1,988.40
May 17, 2023	1,983.60	1,983.60	1,980.70	1,980.70
May 18, 2023	1,956.50	1,956.80	1,956.50	1,956.50
May 19, 2023	1,960.00	1,978.70	1,960.00	1,978.70
May 22, 2023	1,980.50	1,980.50	1,974.80	1,974.80
May 23, 2023	1,972.40	1,972.40	1,972.40	1,972.40
May 24, 2023	1,975.40	1,975.40	1,962.80	1,962.80
May 25, 2023	1,943.10	1,943.10	1,943.10	1,943.10
May 26, 2023	1,948.20	1,948.40	1,944.10	1,944.10
May 30, 2023	1,942.70	1,962.60	1,931.00	1,958.00
May 31, 2023	1,958.20	1,973.00	1,953.00	1,963.90

3. GDP & Import/Export

Several factors moderate the magnitude of a trade deficit's effect on GDP. The volume of imports and exports into and out of a country can impact the value of its currency and the health of its economy. When a country imports more than it exports, it could cause problems for those holding the currency. The GDP could drop as a result.

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

The following chart exemplifies the difficulty of accurately predicting trade deficits. Curiously, the share of imports with Indian origins increased between March and July. However, more development is needed in this area. For the first time in 2022, India's trade balance was in the black in both October and December. India's international trade deficit increased by $8.7 million despite the surplus. There has always been a significant disparity between exports and imports. The September optimistic delta is encouraging, barring any hiccups.

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

Countries running trade deficits need to devalue their currency. It could reduce the efficiency of routine tasks. Despite the devaluation, India's GDP grew from 5.4% in February 2022 to 13.5% in July 2022 and 6.1% in March 2023. This impressive economic growth is a direct result of the hard work of the Indian government and bodes well for India's financial future. The RBI forecasts that growth will slow down by the year 2023. The currency's value will increase if this trend continues for three consecutive quarters.

4. Inflation rates

The value of a country's currency can be significantly affected by its GDP and inflation rate. July's annual inflation rate of 6.71% was the lowest reading since January 2022. Since June's 7.01% rate, we've seen a decrease to 4.09%.

India's Inflation rates
Date	Percentage
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
Feb-23	6.44
Mar-23	5.66
Apr-23	4.70

The inflation rate went from 6.1% to 4.7% from January to April of the same year. Since the connection between GDP and inflation is intricate and interconnected, pinpointing the cause of rate differences can be difficult. These swings are unavoidable due to the economy's rapid expansion, which causes them on occasion.

US Inflation rates
Date	Percentage
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
Feb-23	6.00
Mar-23	5.00

The inflation rates in both the United States and India have risen recently. U.S. inflation hit 9.1% in May 2022, prompting the Federal Reserve's 75% repo rate hike in June. Inflation fell to its lowest level in three years in April 2023, at 4.9%. It was clear from the falling value of the rupee that the U.S. dollar was making more progress than the Indian economy.

5. Interest rates

To curb CPI price increases, the Reserve Bank of India increased interest rates from 4.4% to 4.9% in July 2022. Because of the higher cost of doing business, banks are likely to raise their deposit and loan rates. Most Indians agree that an increase in interest rates would benefit the country's economy. The coronavirus pandemic killed off 4% of India's population by 2020. The repo rate increased in August 2022 from 5.24% to 5.25%, and it rose again in September 2022 by 0.1%. The interest rate is currently 5.25%, but it has increased to 6.50% in December 2022. There was widespread speculation that the Reserve Bank of India (RBI) would increase the repo rate following the February presentation of the Union Budget.

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

Like the Federal Reserve in the United States, the Reserve Bank of India has increased interest rates in response to inflation. The repo rate has risen significantly, up 75%. As of May 2023, the interest rate has dropped to 5.08% due to the improved economy and lower inflation. Raising interest rates by the Federal Reserve is crucial to the American economy's success. The Indian rupee loses value against the US dollar as the gap in cultural and linguistic understanding between India and the United States widens.

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

When FDI rises, interest rates usually follow suit. In this case, there are advantages and disadvantages to think about. The Indian central bank plans to buy more foreign currency to devalue the rupee. The Reserve Bank of India forecast that 2022 foreign investment will increase by about $83 billion from 2021 levels, mainly due to higher foreign currency sales. If RBI assets reach over $100 billion by the end of the 2022-2023 fiscal year, we may see 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 graph above shows the regular rhythm of FDI stock purchases by overseas companies. In March of 2023, sales of these shares were higher than they would be in the following year, but by December, they had dropped to around $2,382,000.00. Foreign investment is expected to continue falling as the Indian economy improves, according to analysts. The Indian economy is expected to improve significantly by 2023 or 2024, which will boost the value of the rupee.

The government of India has taken measures to promote the rupee's acceptance abroad. The Reserve Bank of India (RBI) and the Federal Reserve System (Fed) in the United States are not to be given credit for stabilizing the Indian economy; instead, it is the organizations, businesses, and people of India. The value of the rupee and the health of the Indian economy have taken a hit due to developments on the global stage and other factors. The government and the RBI, however, are acting to restore stability. If we pool our resources and work together, we can keep the economy growing and prices stable until 2024.