Why is the USD to INR Exchange Rate Up today on 31st July 2023 (2nd half of July 2023)?

Key points:

• The value of the Indian rupee has declined against the dollar.
• The Federal Reserve of the United States has recently undertaken a strategic monetary policy approach, aiming to proactively raise interest rates to mitigate and effectively manage the potential repercussions of inflationary pressures.
• The prevailing trajectory of inflation rates in the United States and India is downward.
• The Indian economy exhibited a positive growth trajectory in the preceding quarter.

According to the analysis conducted by financial experts, India's economic growth trajectory is expected to experience a significant transformation in the period following 2023. Despite the current global economic downturn, it is important to note that the economic conditions in the United States have shown promising improvement. India's Gross Domestic Product (GDP) experienced a notable upswing of 13.5% during the most recent quarter, indicative of substantial growth in economic activity. The rupee demonstrated a sustained and steady appreciation in its valuation. Financial analysts tend to favor assessing India's economic growth through annual measurements instead of quarterly ones. The synergistic partnership between the Reserve Bank of India (RBI) and various governmental bodies has yielded favorable outcomes for the Indian economy. The government's recent implementation of policy measures, including the upward revision of interest rates and the imposition of trade restrictions, has resulted in favorable outcomes for both the economy and the currency. As a result, these measures have positively impacted the overall financial landscape.

USD to INR Exchange Rates
Date	Open	High	Low	Close
Jul 17, 2023	82.0768	82.1976	81.9981	82.0768
Jul 18, 2023	82.0616	82.0912	81.964	82.0616
Jul 19, 2023	82.0754	82.1471	82.0271	82.0754
Jul 20, 2023	82.0617	82.0788	81.9141	82.0617
Jul 21, 2023	82.0824	82.0993	81.936	82.0824
Jul 24, 2023	81.9903	82.0409	81.794	81.9903
Jul 25, 2023	81.8142	81.9077	81.663	81.8142
Jul 26, 2023	81.9501	82.0704	81.83	81.9501
Jul 27, 2023	81.9755	82.2309	81.883	81.9755
Jul 28, 2023	82.3749	82.3751	82.154	82.3749
Jul 31, 2023	82.2528	82.366	82.118	82.2528

Based on the most recent market data, it is apparent that the current positioning of the USD/INR exchange rate stands at 82.00. The statement above pertains to the current exchange rate between the United States dollar and the Indian rupee, which signifies the relative worth of one unit of the former about the latter. In the latter half of the current month, the rupee has exhibited a commendable enhancement in its stability when juxtaposed with the preceding half. The recent market performance of the rupee showcases a promising upward trend, indicating substantial growth prospects within the global economy. The increased fluctuation witnessed in the Indian rupee's valuation has exacerbated the prevailing apprehensions surrounding the long-term stability of the Indian economy and its currency. The Indian rupee experienced a notable surge, reaching its highest point of 82.23 against the US dollar on July 28, 2023. Following a series of events, the asset above experienced a significant decline, ultimately reaching a low point of 81.66 on July 25, 2023. The analyzed help has demonstrated a 14-day historical volatility with a daily average of 0.0305 points. The Indian government, in conjunction with the Reserve Bank of India (RBI), is actively implementing strategic measures to mitigate the rupee depreciation. Global central banks, including the esteemed Federal Reserve, have implemented strategies to reduce interest rates in response to prevailing economic circumstances marked by heightened inflationary forces.

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 a significant majority of more than 80% of the overall import volume. Nevertheless, it is imperative to underscore that the current market share of India's ports stands at a comparatively modest 10% in the global trade landscape. India has effectively implemented a meticulously planned approach to enhance its diversification of crude oil imports by bolstering its procurement from critical sources such as Gabon, Colombia, Canada, Nigeria, and Iraq. The rationale behind the strategic decision to embark on this particular course of action stems from the imperative to minimize the inherent risks that arise from excessive dependence on a restricted cohort of oil producers. The prevailing state of the global economy has been considerably influenced by various factors, with particular emphasis on the persistent trade tensions between Russia and Ukraine, the widespread influenza outbreak, and the enduring challenges within the oil industry. The prevailing economic landscape has created a complex and demanding commercial milieu. The crude oil market price has witnessed a substantial surge of more than 100%, ascending from a nadir of $70 per barrel to a zenith of $120 per barrel. Based on the projected financial forecasts, India is anticipated to allocate a significant sum of $722.54 million to Brazil in the initial quarter of the fiscal year 2023-2024. The allocation is a component of their strategic arrangement to acquire oil resources. The United States' crude oil demands are primarily fulfilled using imports, representing a substantial majority of more than 70%.

Upon conducting a comprehensive examination of the data provided in both tabular and graphical formats, it is evident that the price of a single barrel of oil has exhibited an unconventional decline. The observed bearish trajectory commenced on July 31, 2023, with the price at $80.6, and reached its zenith on July 17, 2023, recording a value of $73.84. The interdependence between the Indian economy and its socio-economic structure is closely tied to the performance of the crude oil market, exerting substantial influence. Consequently, any adverse developments in this specific industry have the potential to adversely affect productivity levels while simultaneously exerting upward pressure on prices. Furthermore, it is essential to highlight that the prevailing conditions can potentially result in a depreciation of the Indian rupee.

Crude Oil (in USD)
Date	Open	High	Low	Close
Jul 17, 2023	75.02	76.09	73.84	74.15
Jul 18, 2023	74.18	75.96	73.88	75.75
Jul 19, 2023	75.84	76.97	75.07	75.35
Jul 20, 2023	75.35	76.15	74.72	75.63
Jul 21, 2023	75.7	77.29	75.69	77.07
Jul 24, 2023	77.01	79.28	76.44	78.74
Jul 25, 2023	78.85	79.9	78.29	79.63
Jul 26, 2023	79.34	79.77	78.55	78.78
Jul 27, 2023	78.9	80.6	78.87	80.09
Jul 28, 2023	79.84	80.71	79.07	80.58
Jul 31, 2023	80.65	82	80.13	81.8

2. Gold imports

The cultural and economic significance of gold is significantly enhanced by its widespread usage in the Indian jewelry industry, thereby bolstering its overall value proposition. Throughout the fiscal years of 2022 and 2023, there was a discernible surge in apprehension among individuals about their inadequate gold reserves in light of the imminent pandemic. The Indian economy has encountered a period of contraction due to the recent upswing in gold prices and amplified import levels. As a result, the government has implemented an additional 15% surcharge on gold imports, further enhancing the already burdensome duty. Given the recent surge in tax rates, it is pertinent to acknowledge the resilient demand demonstrated by purchasers, primarily attributable to the significant depreciation of gold. Depreciation serves as a crucial mechanism in offsetting the negative impact of increased taxation, consequently bolstering the overall market demand and ensuring its stability over time.

The visual representations, in the form of graphs and tables, effectively illustrate the consistent and gradual upward movement observed in the value of gold. Considering the prevailing market conditions, it becomes apparent that the median valuation of gold presently stands at $1962.04. Our comprehensive analysis shows that the price of gold has demonstrated a bearish trajectory, experiencing a decline from $1978.89 on July 18 to $1945.20 on July 17, 2023. The infusion of gold into the Indian economy from external sources has demonstrated a discernible impact on the inflationary path, leading to a substantial increase in inflationary metrics. To proactively mitigate the effects of inflationary pressures, the Federal Reserve should contemplate implementing measures to constrain the government's procurement of gold.

Gold Rate (in USD)
Date	Open	High	Low	Close
Jul 17, 2023	1,954.00	1,956.50	1,946.60	1,952.40
Jul 18, 2023	1,968.80	1,978.40	1,963.40	1,977.20
Jul 19, 2023	1,977.00	1,977.50	1,973.00	1,977.50
Jul 20, 2023	1,973.70	1,973.70	1,965.60	1,968.30
Jul 21, 2023	1,961.80	1,964.30	1,961.80	1,964.30
Jul 24, 2023	1,965.30	1,965.50	1,960.30	1,960.30
Jul 25, 2023	1,953.00	1,962.50	1,953.00	1,962.10
Jul 26, 2023	1,966.20	1,972.00	1,966.20	1,968.90
Jul 27, 2023	1,945.40	1,945.40	1,945.40	1,945.40
Jul 28, 2023	1,945.50	1,962.20	1,944.20	1,960.40
Jul 31, 2023	1,959.20	1,971.60	1,950.00	1,970.50

3. GDP & Import/Export

The influence of a trade deficit on GDP is contingent upon the mitigating effects imposed by many factors. The trade balance, a crucial indicator of a nation's import and export differentials, substantially influences its currency exchange rate and broader economic health. A trade deficit, characterized by an imbalance where a nation's imports surpass its exports, could have adverse implications for investors with the associated currency. A potential consequence of an economic downturn is a contraction in the Gross Domestic Product (GDP).

India: Imports & Exports (in US$ Million)
Date	Export (US$ Million)	Import (US$ Million)
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
May-23	7.70	2.00

The visual representation presented below comprehensively depicts the intricacies of formulating accurate predictions regarding trade deficits. From March to July, a significant upward trend was observed in the proportion of imports originating from India. The injection of supplementary funds is imperative to bolster the advancement of this industry. The trade balance of India demonstrated a promising upward trajectory during the last quarter of 2022, as evidenced by trade surpluses in both October and December. This positive trend suggests a favorable outlook for the country's trade performance. India's balance of trade experienced a substantial increase in the deficit, reaching a notable amount of $5.7 million, despite the country's ample resources. An evident disparity in trade has endured over the preceding periods, characterized by a persistent deficit in exports relative to imports. The positive trend observed in September demonstrates a favorable indication, barring any unforeseen challenges or obstacles that may impede advancement.

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 meticulously deliberate on the strategic implementation of currency devaluation. The suboptimal execution of routine tasks may lead to decreased operational efficiency. Despite the currency's depreciation, India's Gross Domestic Product (GDP) exhibited a noteworthy upward trend, witnessing a significant surge from 5.4% in February 2022 to 13.5% in July 2022, subsequently moderating to 6.1% in March 2023. The remarkable expansion 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 presented by the esteemed Reserve Bank of India (RBI), there is expected to be a gradual deceleration in the rate of economic growth by the year 2023. Based on the prevailing market conditions, the currency's valuation is anticipated to demonstrate a positive trajectory throughout the upcoming three consecutive quarters.

4. Inflation rates

The valuation of a nation's currency is significantly influenced by two crucial factors, namely, its Gross Domestic Product (GDP) and the inflation rate. The July annual inflation rate experienced a notable decrease, ultimately reaching a level of 6.71%, indicating a stabilization in the inflationary trend.

India's Inflation rates
Date	Percentage
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
Jun-23	4.81

This metric signifies the most advantageous observation documented since the commencement of the ongoing fiscal year in January 2022. After experiencing a significant interest rate of 7.01% in June, there has been a subsequent decrease to 4.09%. The inflation rate experienced a notable decline, from 6.1% in January to 4.81% in June within the corresponding fiscal year. A thorough analysis is warranted to fully comprehend the intricate and interdependent dynamics between Gross Domestic Product (GDP) and inflation. The task at hand involves identifying and analyzing the underlying factors contributing to variations in interest rates, a job that can prove to be quite complex. The market's oscillations are an intrinsic consequence of the economy's rapid expansion, leading to intermittent instability.

US Inflation rates
Date	Percentage
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
Jun-23	3.00

Based on the latest data, a notable surge in inflation rates has been observed in both the United States and India. During May 2022, the United States experienced a significant uptick in the inflation rate, exhibiting a noteworthy surge to 9.1%. In light of the prevailing market conditions, the Federal Reserve astutely executed a calculated decision to raise the repo rate by 75% in June. The inflation rate exhibited a notable downtrend, registering a substantial decrease to 3.0% in June 2023, representing its lowest level observed in the preceding three-year period. The devaluation of the rupee indicates a simultaneous strengthening of the US dollar in the Indian economy.

5. Interest rates

The Reserve Bank of India (RBI) strategically responded to the upward movement of the Consumer Price Index (CPI) by implementing a prudent approach, increasing the existing interest rates from 4.4% to 4.9% in July 2022. Given the current trajectory of rising expenditures linked to the execution of commercial activities, financial establishments may opt to augment their interest rates for deposits and loans. Based on the prevailing sentiment among the Indian population, it is anticipated that an upward trajectory in interest rates will have a favorable effect on the nation's economic panorama. In fiscal year 2020, India witnessed a significant decline in its population due to the adverse effects stemming from the global proliferation of the coronavirus pandemic, leading to an observable contraction of approximately 4% in its demographic metrics. During August 2022, there was a marginal upward movement in the repo rate, rising from 5.24% to 5.25%. Given the developments mentioned above, it is crucial to underscore that in September 2022, a marginal uptick of 0.1% was observed in the repo rate. Our comprehensive analysis shows that the prevailing interest rate, which currently stands at 5.25%, is anticipated to undergo a notable upward trajectory. Our projections indicate that by December 2022, the interest rate is expected to reach 6.50%. According to market participants, there was a prevailing consensus that the Reserve Bank of India (RBI) would probably unveil an increase in the repo rate after 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

The Federal Reserve in the United States has decided to increase interest rates in response to the prevailing inflationary pressures following the implementation of strategic initiatives by the Reserve Bank of India. The repo rate has experienced a significant upward trend, showcasing a remarkable increase of 75%. During July of the year 2023, there was a significant decrease observed in the prevailing interest rate, ultimately settling at a noteworthy level of 5.33%. The decline in value can be ascribed to favorable economic conditions and mitigated inflationary pressures. The Federal Reserve's recent decision to raise interest rates is a pivotal measure aimed at safeguarding stability and fostering the expansion of the American economy. The devaluation of the Indian rupee vis-à-vis the US dollar can be ascribed to many factors, encompassing economic fundamentals and market dynamics. One notable determinant is the presence of cultural and linguistic disparities between India and the United States, which could influence the prevailing exchange rate.

US Fed Interest Rates
Date	Interest Rate
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
Jul-23	5.33

6. Foreign and Domestic Investment

An upward trajectory in foreign direct investment (FDI) generally aligns with a corresponding 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 bolstering its foreign currency reserves to exert a bearish impact 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 upswing of approximately $83 billion, surpassing the levels observed in the previous year. The noteworthy surge in expansion can be primarily attributed to the significant increase in foreign currency sales. Based on the assumption that the Reserve Bank of India's assets will surpass the considerable threshold of $100 billion by the conclusion of the fiscal year 2022-2023. We will likely witness a gradual devaluation of the rupee based on the current market conditions.

The chart depicts the consistent trend observed in multinational enterprises' foreign direct investment (FDI) equity acquisitions. In the first quarter of 2023, the assessed shares witnessed a substantial upswing in sales, exceeding the anticipated figures for the upcoming fiscal year. However, it is crucial to emphasize that the conclusion of the fourth quarter experienced a noticeable decline in sales, totaling approximately $2,382,000.00. According to the comprehensive analysis conducted by esteemed financial experts, it is anticipated that foreign investment will experience a decline as a result of the favorable trajectory exhibited by the Indian economy. Based on the prevailing economic projections, it is expected that the Indian economy is positioned for a significant upward trend, potentially manifesting in the upcoming years of 2023 or 2024. The positive trajectory is anticipated to align with a commensurate appreciation in the valuation of the Indian 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 Indian government has strategically implemented a series of initiatives to bolster the rupee's global 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 key players within the domestic market, including corporations, businesses, and individuals, have played a pivotal role in shaping the current outcome. The devaluation of the Indian rupee and the overall economic performance of India have been negatively influenced by many global events and various contributing factors. The regulatory environment, which includes multiple governmental bodies and the esteemed Reserve Bank of India, is actively implementing strategic initiatives to restore and strengthen the pillars of financial stability. Through the strategic utilization of synergistic resources and the cultivation of mutually advantageous partnerships, an up-and-coming prospect arises for perpetuating considerable economic growth and establishing a robust foundation for price equilibrium until 2024.