Why is the USD to INR Exchange Rate up today on 30th November 2022 (2nd half of November 2022)?

Key points:

• The exchange rate between USD and INR is going up.
• To stop inflation, the US Federal Reserve has raised interest rates to 4%.
• Both India and the US have seen their inflation rates go down.
• In the last quarter, India's GDP has gone down.
• Even though the world economy is in trouble, the US economy is improving.

In July, India's GDP grew by 13.5%, but the rupee hasn't gone up to show this. Most economists and other researchers are optimistic about India's economic future. But the trend has to stay the same for all four quarters for a full year of growth. The Reserve Bank of India (RBI) has worked with the Indian government and other groups to develop plans and projects to help the country's economy. To help the currency and the economy, the government has raised interest rates and limited trade.

USD to INR Exchange Rates
Date	Open	High	Low	Close
16-Nov-22	81.07	81.54	81.07	81.07
17-Nov-22	81.50	81.85	81.35	81.50
18-Nov-22	81.52	81.79	81.49	81.52
21-Nov-22	81.52	81.93	81.54	81.52
22-Nov-22	81.73	81.99	81.60	81.73
23-Nov-22	81.72	81.92	81.68	81.72
24-Nov-22	81.63	81.87	81.58	81.63
25-Nov-22	81.66	81.85	81.41	81.66
28-Nov-22	81.67	81.92	81.52	81.67
29-Nov-22	81.65	81.76	81.49	81.65
30-Nov-22	81.63	81.79	81.28	81.63

We've learned that one US dollar is worth 81.64 Indian rupees. Prices have gone up since the first two weeks of October. It shows that the rupee could do better than it used to. The rupee hit an all-time low of 81.99 on November 22, 2022, but by November 16, 2022, it was back up to 81.07. We are worried about how the recent changes in the exchange rate will affect India's economy and currency. The currency's value has changed by an average of 0.059 rupees per day over the last two weeks. If the difference is significant, the currency could be doing better. Working together, the government, the central bank, and the RBI do everything they can to help the currency's value go up. Still, remember that it will take a while before you see any results. The US Federal Reserve has been doing the same thing, taking steps to stop inflation from reaching levels that have never been seen before.

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. Only 10–15% of India's market comes through its ports. On the other hand, India just started buying crude oil from Gabon, Colombia, and Canada to get a broader range of natural oil. Some of the unique crises that have caused trade barriers to rise are the war between Russia and Ukraine, the pandemic, and the global oil deficit. At $120, a barrel of oil was at its highest price ever. Before, a barrel cost closer to $70, but now it only costs around $80. In the second quarter of 2022–2023, India bought oil from Brazil for $722.54 million. More than 70% of the crude oil the US needs comes from outside of the country.

The chart and table below show that prices have been going down. On November 16, 2022, the price per barrel was $87.51, and on November 28, 2022, it was $73.6. The price has gone up since last month. Crude oil is essential for making things, getting around, and a lot of other things. Costs like these could make people work less, cause prices to go up, and make the Indian rupee weaker.

Crude Oil (in USD)
Date	Open	High	Low	Close
16-Nov-22	86.89	87.51	84.20	85.59
17-Nov-22	85.22	85.45	81.40	81.64
18-Nov-22	82.09	82.64	77.24	80.08
21-Nov-22	80.30	80.30	75.08	79.73
22-Nov-22	80.22	82.36	79.85	80.95
23-Nov-22	81.08	81.95	76.83	77.94
25-Nov-22	77.51	79.90	76.22	76.28
28-Nov-22	75.93	77.84	73.60	77.24
29-Nov-22	76.54	79.65	76.29	78.20
30-Nov-22	79.00	81.38	78.40	80.55

2. Gold imports

Indians have a special feeling about gold because it is the most common metal used to make jewelry. After being unable to do so during the epidemic, people started saving gold in 2022. When India imports more gold, inflation increases, hurting the economy. In response, the government made gold imports more expensive by raising the tax from 10.75% to 15%. But low prices have made up for the higher taxes, and even though people have to pay more, they still buy gold

The prices of gold have been decreasing, as shown in the table and graph below. The cost of an ounce of gold is $1751.47, which is more than the average price for the last two weeks of October. The price of gold ranged from $1778.90 to $1736.10 from November 16 to November 21, 2022. Inflation is directly caused by getting more gold from other countries. So, the government should limit how much gold it can take in.

Gold Rate (in USD)
Date	Open	High	Low	Close
16-Nov-22	1,776.60	1,778.90	1,773.00	1,773.00
17-Nov-22	1,763.00	1,763.00	1,756.00	1,760.80
18-Nov-22	1,763.30	1,763.30	1,747.60	1,751.90
21-Nov-22	1,739.00	1,744.90	1,736.10	1,737.40
22-Nov-22	1,741.70	1,741.70	1,738.30	1,738.30
23-Nov-22	1,736.50	1,750.90	1,736.50	1,744.90
25-Nov-22	1,753.00	1,757.90	1,749.20	1,753.30
28-Nov-22	1,741.30	1,741.30	1,740.10	1,740.10
29-Nov-22	1,739.50	1,758.20	1,737.90	1,748.40
30-Nov-22	1,748.10	1,769.40	1,745.10	1,746.00

3. GDP & Import/Export

The trade gap and GDP are linked in a lot of ways. Every country's currency and economy are affected by what it buys and sells. The value of a coin goes down when there are more imports than exports, and it goes up when there are more exports than imports. When the value of a currency drops, the people who own it have less money to spend. Because of this, the GDP will go down.

The following chart shows how hard it is to predict how big the trade gap will get. India's imports went up a lot from March to July. On the other hand, things are getting better. The value of exports is higher than the value of imports in October 2022. Because of this new surplus, India's deficit has grown to $8.7 million. The difference between what is exported and what is brought in has always been more prominent. Still, the positive delta for September seems like a good sign.

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

The value of the local currency went down because more goods came into the country than went out. Because of this, things don't work as well. Even though the currency's value decreased, the Gross Domestic Product (GDP) grew from 5.4% in February 2022 to 13.5% in July 2022. India's economy is growing more quickly than any other. It happened because the Indian government and the Reserve Bank of India worked to make it happen. The RBI says that by 2023, economic growth should slow down or even speed up. It is a great way to find out how the economy in India is doing. Before the currency goes up, this trend must continue for three quarters in a row.

4. Inflation rates

The rate of inflation can also make a currency worth less or more. When the GDP falls, inflation rises. The annual inflation rate was 6.71% lower in July 2022 than in June 2022, when it was 7.01%. On the other hand, by October 2022, it had gone down to 6.7%. It's different from the strong growth of GDP. Since all of these things are linked, it's hard to determine where this difference comes from.

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

Inflation is a problem in both India and the United States. The US inflation rate hit a new high of 9.1% in May 2022. The Federal Reserve raised the repo rate by 75 basis points to stop prices from going up. Inflation went down to 7.7% in October 2022. The exchange rates show how much better the US did than India in these areas.

5. Interest rates

The RBI raised the repo rates by 50 basis points to slow down inflation in July 2022. The rate of interest went up from 4.4% to 4.9%. When the repo rate goes up, so do banks' rates for loans and deposits. People think that when interest rates go up, they will bring in a lot of money, which will help the economy of India. Because of the coronavirus outbreak, speeds dropped to a record low of 4% in 2020. The repo rate went up in August 2022, which made interest rates go up to 5.4%. Since then, nothing has changed. Most people think the Reserve Bank of India (RBI) will raise repo rates again 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 interest rates were raised by the Reserve Bank of India and the Federal Reserve of the United States to help stop inflation. The repo rate increased by 75%, which is a significant change. The interest rate is now 4% as of October 2022. The inflation rate has gone down because of this rise. Most people think that until the U.S. economy is stable, the Federal Reserve will keep raising interest rates. The significant differences between India and the U.S. are a big reason why the Indian rupee does badly against the dollar.

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

Foreign direct investment (FDI) will likely go up when interest rates go up. There will be pros and cons, just like with anything else. The rupee's value decreases when the RBI buys more foreign currency. When the RBI sells more foreign currency, the rupee's weight increases; in 2021 and 2022, about $83 billion will be invested abroad. The RBI will get more than $100 billion in assets in the fiscal year 2022–23. It could mean that the rupee will lose even more value.

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

The chart below shows how FDI equity inflows can be different at times. From March to April, the amount coming in went up, but by June 2022, it had gone down to $3,978 million, a significant drop. India will likely get less foreign direct investment (FDI) until the economy gets back on track. India's economy and currency will strengthen and move faster in 2023 or 2024.

The Indian finance minister said, "The dollar value is going up. The rupee won't get weaker." Because of the things above, the second sentence is true. The RBI and the Fed work to ensure that their economies are safe. Many things outside India affect the Indian rupee and the Indian economy. To determine why the performance is so bad, you must look into and evaluate many things, most of which are connected. But the Indian government and the Reserve Bank of India are taking essential steps to get the economy going again. We can make it more likely for the economy and currency to grow and stay stable until 2023 if we all work together.