Why is the USD to INR Exchange Rate down today on 31st October 2022 (2nd half of October 2022)?

Updated on: 2022-10-31 - 10 mins read
USD to INR Exchange RateGold PriceCrude OilGDPImport & ExportInterest RatesInflation RatesRemittance NewsExchange Rate AnalysisExchange Rate Forecast
Why is the USD to INR Exchange Rate down today on 31st October 2022 (2nd half of October 2022)?

Even though India's GDP grew by a robust 13.5 percent in July, the rupee has not risen to reflect this. In general, economists and researchers are optimistic about India's economic future. However, a full year of growth requires that the trend continues for all four quarters of that year. The Reserve Bank of India (RBI), along with the Indian government and other supporting organizations, has developed several plans and initiatives to boost the country's economy. The government has used a variety of measures, including interest rate hikes and trade restrictions, to fortify the currency and the economy.

USD to INR Exchange Rates
Date Open High Low Close
16-Oct-22 82.41 82.65 82.11 82.41
17-Oct-22 82.19 82.68 82.01 82.19
18-Oct-22 82.29 83.39 82.17 82.29
19-Oct-22 83.00 83.33 82.55 83.00
20-Oct-22 82.83 83.22 82.56 82.83
23-Oct-22 82.54 83.07 82.54 82.54
24-Oct-22 82.76 83.14 82.43 82.76
25-Oct-22 82.45 82.55 81.92 82.45
26-Oct-22 82.05 82.71 81.93 82.05
27-Oct-22 82.44 82.78 82.28 82.44
31-Oct-22 82.24 83.12 82.19 82.24

Based on the data presented above, the value of one US dollar is currently 82.64 Indian rupees. The rates have increased from the first two weeks of October. It's a sign that the rupee's performance has worsened. On October 18, 2022, the rupee hit a low of 83.386 and recovered to end the month at 81.92. We are concerned about the impact that the recent volatility of the exchange rate will have on the Indian economy and currency. Each day during the past two weeks, the currency's value has fluctuated by an average of 0.207 rupees (October 16, 2022, to October 31, 2022). A significant deviation indicates poor currency performance. The central bank, the RBI, and the government, all working together, are doing everything they can to help the currency's value increase. Still, remember that it will be a while before you see any results. The US Federal Reserve has been doing the same thing, taking preventative measures against inflation that has reached historically high levels.

Several components must function reasonably well if the currency is to be robust and stable. They are:

1. Crude Oil

Countries like the United Arab Emirates (UAE), Russia, and Saudi Arabia typically supply more than 80% of India's crude oil requirements. Only 10–15% of India's market comes from its ports. However, India recently began importing crude oil from countries like Gabon, Colombia, and Canada to diversify its natural oil supply. Such action has been prompted by the increasing trade barriers caused by various unique crises, including the Russia-Ukraine conflict, the pandemic, and the global oil deficit. A barrel of oil hit a record high of $120. It used to be closer to $70, but now it's only around $80 per barrel. The second quarter of 2022-23 saw India spend $722.54 million on oil from Brazil. Imports meet more than 70% of the United States' crude oil requirements.

The chart and table below show that prices have been going down recently. The peak price of $89.79 per barrel was on October 26, 2022, and the lowest was on October 17, 2022, at $82.09. It is an increase from the prior month's cost. Crude oil is essential to manufacturing, transportation, and related industries. Reduced productivity, higher inflation, and a weaker Indian rupee are all possible outcomes of such costs.

Crude Oil (in USD)
Date Open High Low Close
16-Oct-22 85.59 87.12 84.61 85.46
17-Oct-22 85.70 86.51 82.09 82.82
18-Oct-22 83.69 86.20 82.59 85.55
19-Oct-22 85.94 88.17 85.22 85.98
20-Oct-22 85.07 85.90 83.15 85.05
23-Oct-22 85.24 85.92 82.63 84.58
24-Oct-22 84.88 86.03 83.06 85.32
25-Oct-22 85.07 88.41 84.14 87.91
26-Oct-22 88.26 89.79 87.33 89.08
27-Oct-22 88.67 88.76 87.08 87.90
31-Oct-22 88.39 88.65 85.3 86.53

2. Gold imports

Since gold is the most commonly used metal in ornamentation, it holds special significance for Indians. After being barred from doing so during the epidemic, several people started stocking up on gold in 2022. Importing more gold hurts the Indian economy because it increases inflation. The government responded by raising the import tax on gold from 10.75% to 15%. However, the low prices have countered the tax increase, and people have continued to add gold to their holdings.

As can be seen in the table and graph below, gold prices have been falling. The current price of gold, $1648.23 per ounce, is lower than the average for the first two weeks of September by about $5. Gold's price ranged from $1667.00 on October 25 to $1622.80 on October 19, 2022. Rising inflation is a direct result of increasing gold imports. Therefore, restrictions should be placed on the amount of gold entering the country.

Gold Rate (in USD)
Date Open High Low Close
16-Oct-22 1,650.20 1,657.00 1,646.80 1,657.00
17-Oct-22 1,651.40 1,655.20 1,649.00 1,649.00
18-Oct-22 1,637.50 1,637.50 1,627.50 1,627.50
19-Oct-22 1,622.80 1,641.40 1,622.80 1,630.80
20-Oct-22 1,634.10 1,653.90 1,634.10 1,651.00
23-Oct-22 1,662.70 1,662.70 1,648.70 1,648.70
24-Oct-22 1,648.20 1,652.80 1,637.30 1,652.80
25-Oct-22 1,649.80 1,667.00 1,649.80 1,664.00
26-Oct-22 1,660.70 1,660.70 1,660.70 1,660.70
27-Oct-22 1,661.00 1,661.00 1,638.70 1,639.60
31-Oct-22 1,641.80 1,641.80 1,633.40 1,635.90

3. GDP & Import/Export

There is a close relationship between the trade gap and GDP. Every nation's currency and economy are affected by imports and exports. The value of a currency declines when imports exceed exports and increases when exports surpass imports. A decline in a currency's value reduces its holders' purchasing power. There will be a drop in GDP as a result of this.

The following chart visually depicts the unpredictability of the widening trade gap. Imports into India rose dramatically between March and July. The situation, however, appears to be getting better. Exports in September 2022 are higher in value than imports. With this new surplus, India's deficit has risen to $1.6 million. There has always been a more significant gap between exports and imports. Nonetheless, September's positive delta appears to be promising.

India: Imports & Exports (in US$ Million)
Date Export (US$ Million) Import (US$ Million)
Jan-22 24.50 34.00
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 20.2 22.3
Aug-22 24.3 27.1
Sep-22 29.7 28.1
GDP Rate in India
Date Rate (%)
Jul-19 6.25%
Aug-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 13.5%

Since imports into the country have exceeded exports, the value of the local currency has declined. The result is a drop in performance. The GDP increased rapidly from 4.9% in June 2022 to 13.5% in July 2022 despite the currency's depreciation. India's economy is growing at a faster rate than any other. The work of the Indian government and the Reserve Bank of India has led to this. According to the RBI, economic growth should level off and even accelerate by 2023. It's a highly reliable gauge of the state of the Indian economy. The development, however, must be sustained for three consecutive quarters before the currency can appreciate.

4. Inflation rates

A currency's worth can also be affected by inflation rates. When GDP falls, inflation increases. The annual inflation rate dropped 6.71% in July 2022 from June 2022's 7.01%. On the other hand, by September 2022, it had risen to 7.41%. It stands in sharp contrast to the robust expansion of GDP. Because of the interconnected nature of these factors, pinpointing the source of this discrepancy is challenging.

India's Inflation rates
Date Percentage(%)
Sep-21 4.35
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
Sep-21 4.35
US Inflation rates
Date Percentage(%)
Sep-21 5.40
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

Similar to India, inflation is an issue in the United States. Inflation hit a record 9.1 percent in the United States in May 2022. The Federal Reserve raised the repo rate by 75 basis points to counter rising prices. Inflation is expected to fall to 8.2% in September 2022. Since the United States fared much better than India in these categories, the exchange rates reflect this.

5. Interest rates

To slow inflation, the RBI raised repo rates by 50 basis points in July 2022. Rates went up from 4.4% to 4.9%. Banks' interest rates on loans and deposits rise in response to an increase in the repo rate. The rise in interest rates is expected to bring in much money, which will help the Indian economy. Due to the coronavirus epidemic, speeds dropped to a record low of 4% in 2020. The repo rate increased in August of 2022, which led to a rise in interest rates to 5.4%, and has stayed the same ever since. The Reserve Bank of India (RBI) is widely expected to increase 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 Reserve Bank of India and the Federal Reserve of the United States increased interest rates to help curb inflation. The repo rate was increased by 75%, which is a significant amount. The interest rate is now 4% as of October 2022. As a result of the increase, inflation rates have fallen. The Federal Reserve is widely expected to continue raising interest rates until the US economy is stable. The Indian rupee's poor showing against the dollar can be directly attributed to the stark contrast between these two countries.

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

As interest rates rise, FDI (foreign direct investment) is predicted to grow. As with anything, there will be upsides and downsides. The value of the rupee falls when the RBI buys more foreign currency and rises when the RBI sells more foreign currency. In the years 2021 and 2022, the overseas investment will amount to roughly $83 billion. More than $100 billion in assets will be held in the fiscal year 2022-23—a possible indicator of a further decline in rupee 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 following chart depicts the sporadic nature of FDI equity inflows. From March to April, inflow increased, but by June of 2022, it had dropped to $3978 million, a significant drop. Foreign direct investment (FDI) in India is expected to decline until the economy there is stabilized. The Indian economy and currency will strengthen and speed up in 2023 or 2024

The Indian finance minister said, "The dollar is growing stronger. The rupee is not falling." The factors mentioned above explain the latter statement. The RBI and the Fed are trying to protect their country's economies. The Indian rupee and the Indian economy are sensitive to many external factors. To isolate the root cause of such poor performance, it is necessary to investigate and evaluate many factors, the vast majority of which are interconnected. However, the Reserve Bank of India and the government of India are making significant strides toward reviving the country's economy. By coordinating our efforts, we can raise the odds that the currency and economy will grow and remain stable through 2023.