Why is the USD to INR Exchange Rate down today on 15th November 2022 (1st half of November 2022)? (2024)

Key points:

• USD to INR Exchange rates are down.
• The US Fed has increased the interest rates to 4% in an attempt to curb inflation rates.
• Inflation rates have reduced in India and the US.

India's GDP grew by 13.5% in July, but the rupee hasn't gone up to show this. Economists and other researchers are generally optimistic about India's economic future. But the trend has to stay the same for all four quarters for a full year of growth. Along with the Indian government and other supporting groups, the Reserve Bank of India (RBI) has devised several plans and initiatives to help the country's economy. The government has raised interest rates and limited trade to strengthen the currency and the economy.

Based on the information above, one US dollar is worth 80.99 Indian rupees. Since the first two weeks of October, the prices have gone up. It shows that the rupee could be doing better than it used to. On November 1, 2022, the rupee fell to an all-time low of 83.07, but by November 11, 2022, it was back up to 80.37. We are worried about how the recent exchange rate changes will affect India's economy and currency. In the last two weeks, the currency's value has changed by an average of 0.781 rupees per day. A significant difference means that the currency isn't doing well. Working together, the central bank, the RBI, and the government does everything to help the currency's value go up. Still, keep in mind that you won't see any results for a while. The US Federal Reserve has been doing the same thing, taking steps to stop inflation from getting to levels that have never been seen before.

If the currency is to be solid and stable, several parts must work pretty well. These are:

1. Crude Oil
2. Gold imports
4. Inflation rates
5. Interest rates
6. Foreign and Domestic Investment

1. Crude Oil

More than 80% of India's crude oil needs are usually met by places like the United Arab Emirates (UAE), Russia, and Saudi Arabia. India's ports only bring in 10–15% of its market. On the other hand, India has just started buying crude oil from countries like Gabon, Colombia, and Canada to get a broader range of natural oil. The Russia-Ukraine conflict, the pandemic, and the global oil deficit are just a few examples of the unique crises that have caused trade barriers to rise. At $120, a barrel of oil reached an all-time high. Before, it was closer to $70 per barrel, but now it's only around $80. India bought oil from Brazil for $722.54 million in the second quarter of 2022–2023. More than 70% of the crude oil the US needs comes from outside the country.

Prices have been going down, as shown by the chart and table below. The highest price per barrel was $93.74 on November 7, 2022, and the lowest was $84.06 on November 15, 2022. The price went up from the month before. Crude oil is essential for making things, moving, and other industries. Costs like these could lead to less work, higher inflation, and a weaker Indian rupee.

Crude Oil Prices from 11-01-2022 to 11-15-2022

2. Gold imports

Gold is the most common metal used to make jewelry, so it has a special meaning for Indians. People started stockpiling gold in 2022 after being unable to do so during the epidemic. More gold imports hurt the Indian economy because they cause inflation to rise. In response, the government raised the tax on gold imports from 10.75% to 15%. But low prices have made up for the higher taxes, and people have kept buying gold even though they have to pay more.

The table and graph below show that gold prices have been decreasing. Gold costs $1704.99 per ounce, which is more than the average price for the last two weeks of October. From November 15 to November 2, 2022, the cost of gold ranged from $1773.80 to $1645.10. Getting more gold from other countries is a direct cause of rising inflation. So, the amount of gold that can come into the government should be limited.

Gold Prices from 11-01-2022 to 11-15-2022

3. GDP & Import/Export

The trade gap and GDP are closely related to each other. Imports and exports affect the currency and economy of every country. When there are more imports than exports, the value of a coin goes down, and when there are more exports than imports, it goes up. When the value of a currency goes down, the people who own it have less money to spend. The GDP will go down because of this.

The following chart shows how hard it is to predict the growing trade gap. Between March and July, India's imports went up a lot. On the other hand, things seem to be getting better. In September 2022, the value of exports is more than the value of imports. India's deficit has grown to $1.6 million because of this new surplus. There has always been a more considerable difference between what is exported and what is brought in. Still, September's positive delta looks like a good sign.

India’s Import/Export from Jan 2022 to Sep 2022

India’s GDP from Jul-2019 to Jul-2022

Since more goods were brought into the country than were sent out, the value of the local currency went down. Performance goes down because of this. Even though the currency fell in value, the GDP proliferated from 4.9% in June 2022 to 13.5% in July 2022. The economy of India is growing faster than any other. It happened because of the work of the Indian government and the Reserve Bank of India. The RBI says that by 2023, economic growth should slow or even speed up. It's an excellent way to figure out how the Indian economy is doing. Before the currency can go up, this trend must continue for three consecutive quarters.

4. Inflation rates

The rate of inflation can also change the value of a currency. When GDP goes down, inflation goes up. In July 2022, the annual inflation rate was 6.71% lower than in June 2022, when it was 7.01%. On the other hand, it had gone down to 6.77% by October 2022. It is very different from the strong growth of GDP. Because these things are all connected, it is hard to determine where this difference comes from.

Inflation Rates in India from Oct 2021 to Oct 2022

Inflation Rates in the US from Oct 2021 to Oct 2022

Inflation is a problem in the United States, just like in India. In May 2022, the US inflation rate reached a new high of 9.1%. The Federal Reserve raised the repo rate by 75 basis points to stop prices from going up. In October 2022, inflation went down to 7.7%. Since the US did much better than India in these areas, this is reflected in the exchange rates.

5. Interest rates

In July 2022, the RBI raised the repo rates by 50 basis points to slow inflation. The interest rate went from 4.4% to 4.9%. When the repo rate goes up, banks' interest rates on loans and deposits also go up. People expect that the increase in interest rates will bring in a lot of money, which will help the Indian economy. In 2020, speeds fell to a record low of 4% because of the coronavirus outbreak. In August 2022, the repo rate went up, which caused interest rates to go up to 5.4%. Since then, they have stayed the same. Most people think the Reserve Bank of India (RBI) will raise repo rates again this year.

Interest Rates in India from Fed-2019 to Aug-2022

The Reserve Bank of India and the Federal Reserve of the United States raised interest rates to help stop inflation. The repo rate went up by 75%, which is a significant change. As of October 2022, the interest rate is now 4%. Because of this rise, inflation rates have gone down. Most people think the Federal Reserve will keep raising interest rates until the US economy is stable. The significant differences between India and the US are a big reason why the Indian rupee does badly against the dollar.

Interest Rates in the US from Aug-2021 to Oct-2022

6. Foreign and Domestic Investment

Foreign direct investment (FDI) will likely grow as interest rates increase. Like anything else, there will be pros and cons. When the RBI buys more foreign currency, the rupee's value decreases. When the RBI sells more foreign currency, the rupee's value increases, and in 2021 and 2022, the amount of money invested abroad will be about $83 billion. In the fiscal year 2022–23, the RBI will receive more than $100 billion worth of assets. It could be a sign that the value of the rupee will drop even more.

FDI in India from Aug-2021 to Jun-2022

The following chart shows how FDI equity inflows are sometimes different. 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. Foreign direct investment (FDI) is expected to go down in India until the economy gets back on track. In 2023 or 2024, the Indian economy and currency will get stronger and move faster.

The finance minister of India said, "The dollar is getting more valuable. The rupee isn't going down." The second statement is true because of the things listed above. Both the RBI and the Fed are working to keep their economies safe. The Indian rupee and the Indian economy are affected by many things happening outside of India. To determine why the performance is so bad, you have to look into and evaluate many factors, most of which are linked. But the Reserve Bank of India and the Indian government are making significant steps toward getting the economy going again. By working together, we can make it more likely that the economy and currency will grow and stay stable through 2023.