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

Key points:

• The Indian rupee is strengthening against the US dollar.
• The Federal Reserve in the US has raised interest rates to 4% to combat inflation.
• The inflation rates in the US and India are both going down.
• In February of 2023, the market anticipates a 25 basis point hike in interest rates from the Reserve Bank of India (RBI).
• India experienced an economic deceleration during the previous quarter.

Economists predict a transition in India's economic growth pattern after 2023. Despite widespread economic weakness worldwide, economic indicators in the United States have been trending upward. India's GDP grew by 13.5 percent in the most recent quarter, but the value of the rupee remained unchanged. Experts agree that one should look at India's economic growth annually rather than quarterly. The Indian economy has been helped along by the RBI's collaboration with other government agencies. The government's decision to raise interest rates and restrict trade has benefited the economy and the currency.

USD to INR Exchange Rates
Date	Open	High	Low	Close
17-Apr-23	81.84	82.08	81.84	81.84
18-Apr-23	82.00	82.10	81.94	82.00
19-Apr-23	82.11	82.28	82.04	82.11
20-Apr-23	82.34	82.38	82.05	82.34
21-Apr-23	82.14	82.29	82.00	82.14
24-Apr-23	82.05	82.15	81.86	82.05
25-Apr-23	81.85	82.02	81.85	81.85
26-Apr-23	81.99	82.09	81.68	81.99
27-Apr-23	81.77	81.85	81.60	81.77
28-Apr-23	81.77	81.86	81.69	81.77

Currently, you can get 82.02 Indian rupees for one U.S. dollar. The second half of this month has seen the rupee remain relatively stable, in contrast to the first half. It's a sign of the rupee's progress and potential for use abroad. Recent fluctuations in the value of the rupee have exacerbated concerns about the future of the Indian economy and currency. The best day for the rupee was April 20, 2023, when it reached a high of 82.38, and the worst day was April 27, 2023, when it dropped to an all-time low of 81.60. The average daily change in the past 14 days has been 0.041 points. Both the government of India and the Reserve Bank of India (RBI) have a stake in maintaining the value of the rupee. The U.S. Federal Reserve and other central banks worldwide have lowered interest rates in response to 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 (UAE), Russia, and Saudi Arabia supply more than 80% of India's crude oil imports, only about 10% of trade goes through India's ports. India has increased crude oil imports from Gabon, Colombia, Canada, Nigeria, and Iraq to lessen its reliance on a select few oil-producing countries. However, international factors like the trade war between Russia and Ukraine, the worldwide flu epidemic, and the oil crisis have made doing business more difficult. Crude oil prices have risen from a low of $70 to a high of $120 per barrel. By the end of the first quarter of 2023-2024, India will presumably have paid Brazil $722.54 million for oil. However, the United States imports over 70% of its crude oil needs.

The table and graph below show that the price of a barrel of oil fell from April 17 ($80) to April 28 ($76) of 2023. Lower productivity in the workplace, higher prices, and a depreciation of the Indian rupee are all possible outcomes, given the importance of crude oil to the Indian economy and way of life..

Crude Oil (in USD)
Date	Open	High	Low	Close
17-Apr-23	82.48	82.71	80.47	80.83
18-Apr-23	81.00	81.48	79.87	80.86
19-Apr-23	80.92	81.18	78.46	79.16
20-Apr-23	78.87	78.89	76.97	77.29
21-Apr-23	77.13	78.39	76.72	77.87
24-Apr-23	77.97	79.18	76.72	78.76
25-Apr-23	78.74	79.07	76.50	77.07
26-Apr-23	77.08	77.93	74.05	74.30
27-Apr-23	74.38	75.28	74.03	74.76
28-Apr-23	74.91	76.92	73.93	76.78

2. Gold imports

Gold's cultural and monetary significance in India stems from its widespread use in Indian jewelry. However, in 2022 and 2023, widespread fear spread as the pandemic approached, and people realized they hadn't saved enough gold to weather the storm. Rising gold imports and prices have been detrimental to India's economy. In response, the government has increased the already prohibitive tax of 10.75% on gold imports by an additional 15%. The falling value of gold more than compensates for the higher tax rate, so investors continue to buy it despite the hike.

The following table and chart display the rising cost of gold. The average price of gold now is $1992.39. This is a rise from the last two weeks of March. Gold is expected to cost between $1969.80 and $2007.60 on April 19 and April 17 of that year, respectively. When gold floods into India from abroad, inflation can skyrocket. The Federal Reserve should consider limiting government purchases of gold to manage inflation.

Gold Rate (in USD)
Date	Open	High	Low	Close
17-Apr-23	2,002.70	2,007.60	1,983.20	1,994.20
18-Apr-23	1,996.90	2,007.40	1,996.90	2,007.40
19-Apr-23	2,005.70	2,006.40	1,969.80	1,995.20
20-Apr-23	1,998.00	2,007.60	1,998.00	2,007.60
21-Apr-23	1,996.20	1,996.20	1,974.10	1,979.50
24-Apr-23	1,981.30	1,989.80	1,977.40	1,989.10
25-Apr-23	1,995.70	1,999.10	1,982.30	1,994.00
26-Apr-23	1,997.80	1,998.80	1,985.60	1,985.70
27-Apr-23	1,990.60	2,002.30	1,979.90	1,989.90
28-Apr-23	1,986.90	1,990.10	1,977.70	1,990.10

3. GDP & Import/Export

Several variables moderate the magnitude of a trade deficit's effect on GDP. The volume of a country's imports and exports can affect its currency's value and its economy's health. When a country imports more than it exports, the value of its currency declines, which can be problematic for its holders. This could lead to a decline in GDP.

The following chart exemplifies the difficulty of accurately predicting trade deficits. Curiously, the share of Indian imports increased between March and July. However, development has occurred in this area. For the first time in 2022, India's trade balance was in the black in both October and December. India's trade deficit with the rest of the world increased by $8.7 million despite the surplus. There has always been a significant chasm between exports and imports. The September positive delta is promising, barring unforeseen problems.

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

When a country has a trade deficit, its currency must be devalued. This could reduce the efficiency of routine tasks. The devaluation did not slow the Indian economy's rapid growth, which accelerated from 5.4% in February 2022 to 13.5% in July 2022 and then slowed to 4.4% in January 2023.

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

This impressive economic growth, which the Indian government worked hard to achieve, bodes well for India's economic future. The RBI forecasts a slowdown in growth by 2023. If this pattern continues for three successive quarters, the currency's value will increase.

4. Inflation rates

The worth of a country's currency may rise or fall depending on factors such as its GDP and inflation rate. Inflation hit its lowest level since January 2022 in July, coming in at 6.71 percent annually. From June's 7.01% to now, the rate has decreased to 4.09%. Inflation in January was 6.1%, but by March of that year, it had fallen to 5.66 %. Because of the complexity and interconnectedness of the relationship between GDP and inflation, it is challenging to attribute rate differences to a single factor. Given the economy's rapid expansion, occasional fluctuations like these are to be expected.

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

Inflation rates have risen in the United States and India in recent years. The Federal Reserve increased the repo rate by 75% in June 2022 because US inflation reached 9.

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

1% in May 2022. Inflation, however, fell to 5.0% in March of 2023, the lowest rate in three years. The dollar's strength seemed to be outpacing India's economy, as measured by the rupee's fall.

5. Interest rates

To bring down consumer prices, the Reserve Bank of India increased interest rates from 4.4% to 4.9% in July 2022. The cost of doing business has gone up, so banks will charge more for deposits and loans. Increasing interest rates is widely seen as beneficial to India's economy. By 2020, the coronavirus pandemic had claimed the lives of 4% of India's population. The repo rate increased from 5.24% to 5.25% in August 2022, and another 0.1% in September 2022. However, the interest rate will increase to 6.50% in December 2022. Many in India expected another repo rate increase from the Reserve Bank of India after the Union Budget was unveiled 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

Like the Federal Reserve in the United States, the Reserve Bank of India has increased interest rates in response to inflation. Significantly, the repo rate has risen by 75%. Inflation has fallen as the economy has improved, resulting in an interest rate of 4.83% as of March 2023. It is widely accepted that interest rate hikes by the Federal Reserve are essential to the well-being of the US economy. The Indian rupee loses value against the US dollar as the gap between the two countries widens in terms of culture and language.

US Fed Interest Rates
Date	Interest Rate
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
Mar-23	4.83

6. Foreign and Domestic Investment

Rising interest rates are associated with increased levels of foreign direct investment. This situation presents its own set of advantages and disadvantages. To devalue the rupee, the RBI will increase its purchases of foreign currency. The Reserve Bank of India predicts a rise in foreign investment of about $83 billion in 2022 compared to 2021 due to higher foreign currency sales. An increase in RBI assets to more than $100 billion by the end of the 2022-2023 fiscal year could lead to a gradual rupee depreciation.

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

Foreign direct investment (FDI) stock purchases by overseas firms are depicted graphically here with a periodic pattern. Between March and April of 2022, sales of these shares increased, but by December of that year, they had dropped to around $4,411,000.00. Analysts expect the recent drop in foreign investment to persist as the Indian economy strengthens. But by 2023 or 2024, it is expected that the Indian economy will have improved significantly, leading to a rise in the rupee value.

The Indian government has made strides toward international currency recognition, which should help the Indian rupee. The Reserve Bank of India (RBI) and the Federal Reserve System (Fed) in the United States do not deserve the credit for stabilizing the Indian economy; rather, it is due to organizations, companies, and the general public. Global events and several interrelated factors have weighed down the performance of the Indian economy and the value of the rupee. However, the government and the RBI are taking steps to restore equilibrium. By working together, we can increase our chances of maintaining steady economic growth and a stable currency through 2024.