Euro to INR Forecast for 2020

Euro to INR Forecast for 2020

How Euro to INR exchange rate works?

As its very nomenclature indicates, the Euro to INR exchange rate depends on the movement separately of Eur to USD and then USD to INR. These pair might trade in opposite directions at times. In case the euro trades strongly against the dollar at a time when rupee, for various reasons, trades at its lowest against the dollar.

It means that while the euro is appreciating against the US dollar, the Indian Rupee is depreciating against the US dollar. The resulting Eur to INR cross will see the euro trade at its strongest levels against the rupee. However, INR being a weaker currency in the pack of these 3 currencies, the general strength of the euro in any period against the dollar will not necessarily mean that the rupee will also trade strongly against the dollar in that same period.

EUR to INR Forecast

Last year saw Eur to INR trade in a wide 82.26-76.14 range with a high of 82.25 was hit in February and the low of 76.14 being hit in August. This contained the period where rupee weakened against the dollar following the sharp decline of Yuan and other Asian currencies as the trade war between US and China reached its peak.

Crude prices dropped sharply as a result of the perception that the trade war would result in slower global economic growth and consequently, lower global crude demand. Lower crude prices helped the rupee to gain against all major currencies as Indian economic fundamentals seemed to be on a mend.

In the current year 2020 too, crude oil prices would be the major factor in rupee trade as the geopolitical tensions in the Middle East seem to be settling down and a flare-up at this moment looks difficult in the coming months after the cooling-off of the US-Iran tensions. With crude prices likely to remain steady this year, we expect the rupee to trade more on the basis of changes in domestic economic fundamentals. We expect USD to INR to remain in the 69.50-72.50 for most of 2020.

Euro is likely to remain under some pressure in 2020 against the dollar as EU economic growth and pick up remain a major issue. The US economy is outperforming its major peers at the moment and we do not think this will change much in 2020.

ECB has not been optimistic about a major uptrend in EU economy this year mostly as a result of the uncertainty about EU-UK trade negotiations which have a deadline of 31st.December 2020. If they are able to sign an agreement on trade by that date, we could see a good recovery of the euro which would then translate into a higher Eur to INR.

On the other hand, if no agreement is reached and results in the UK exiting without a deal, we could see a sharp drop in Euro and a lower EUR to INR. This apart the risk of growing US-EU trade war will always be in the background and will keep the euro under pressure. Any major rally in euro from current levels is not expected in this year.

We expect euro to trade in a 1.0850-1.1350 band against the dollar which should result in an 81.50-78.50 trading band for the EUR to INR.

History of Euro

Euro is the official and common currency of 19 member states of the European Union. There are 28 countries in the European Union which is a political as well as an economic union. Countries which have a common currency in the European Union is called as Euro-Zone. A monetary union was established in 1999 only to come under full-force in 2002 when Eurozone member states adopted a common currency.

The European Central Bank (ECB) is the central bank of the 19 European Union Countries which have adopted Euro as their common official currency. The prime motive of ECB is to provide price stability in the Euro area and protecting the purchasing power of the Euro currency.

Euro is abbreviated as EUR in the international currency exchange market. 1 Euro is composed of 100 cents and the Euro is the second-most traded currency in the foreign exchange market after the US Dollar. Euro is also the second-largest reserve currency of the world. Interestingly, there are 4 European microstates which are outside the EU but still have Euro as their official currencies.

Also Read: To Know More About EUR: The Official Currency of Euro Zone

History of Euro to INR Exchange Rate

Here is the graphical representation of the historical Euro to INR exchange rate:

As you look at the chart, the Euro to INR exchange rate looks very stable from the year 1975 to 1990 but that was because the Indian economy was operating on a fixed rate exchange system. With the economic reforms in 1991-92, when India became an open market economy with flexible exchange rate systems, the relative strengths of the economy started getting reflected in Eur to INR exchange rates.

Another interesting point on the graph is the sharp depreciation of Euro against INR during the Eurozone debt crisis which erupted in 2009 and reached its peak in 2010. Within a short span of time, the euro depreciated by about 20% from Rs. 69.80 levels to Rs. 56.25.

However, Euro made a gradual recovery post-Eurozone debt crisis period and remained in a relatively stable range in the last 5 years.

Also Read: History of 1 Euro to INR from 1990