USD to INR Analysis & Commentary

Updated on 7 Nov 2024

The fluctuations in the USD to INR exchange rate were quite significant for the month of October 2024.

At the beginning of October, the rate was in the range of approximately 83.80 INR per USD, while nearing month-end, the rate went up to about 84.00 INR per USD.

The INR reached a lifetime low of 84.10 per USD on October 11th, which was still modest when compared to other major currencies.

The US dollar continued to surge throughout October. This has been attributed to several factors, including increased uncertainty over the US presidential election and a reduced expectation that the Federal Reserve will cut interest rates.

This global strengthening of the USD put downward pressure on several currencies, including the INR.

There was a significant outflow of funds from foreign portfolio investors from India's stock markets.

There were significant declines in the stock indices, and the interest rate spreads between the US-Indian 10-year bonds narrowed. This made Indian debt less attractive to foreign investors, and therefore, INR depreciated.

Crude oil prices rose during October, which also put the INR under pressure. 

Apart from the above, weakening sentiment on the Indian equity market further contributed to the decline of INR. The sentiment was worsened by fears of intensifying tensions in the Middle East.

During the Diwali holiday in the last week of October, low volatility and limited trading were observed in the forex market. Although some of the above factors were temporarily muted by this, the underlying trend remained the same.

Global uncertainties like inflation and geopolitical tensions, in general, lead to capital outflows from emerging markets like India. The US dollar, being the world's reserve currency, is always a preferred choice during such times.

Despite the depreciation, the Indian Rupee (INR) showed some resilience. The country continues to attract significant Foreign Direct Investment (FDI), which supports the rupee. 

Overall, the INR is likely to become stable against the USD, driven by Reserve Bank of India (RBI) interventions. Any reduction in global oil prices would also support the rupee.

However, US economic conditions will also determine the direction in which the USD versus INR rate would move.

Source:

Indian Express

Livemint

Business Standard

Economic Times

Economic Times

Exchange Rate Analysis for Other Currencies Paired with INR