USD to INR Analysis & Commentary

Updated on 12 Aug 2024

At the beginning of July 2024, the USD exchange rate was approximately 83.45 INR per USD, and by the end of the month, it was approximately 83.75 INR per USD.

A number of factors contributed to USD to INR exchange rate fluctuations in July 2024, some of which are listed below. 

The Federal Reserve held its policy meeting in late July 2024. The Fed decided to maintain the interest rates at 5.25% to 5.50%. 

However, the Fed's statement highlighted ongoing concerns about inflation and suggested the possibility of future rate hikes. This led to the appreciation of USD against INR.

The Q2 2024 US forecast indicates optimism for the economy. The US economy is expected to grow by 2.4% this year. This may have supported a stronger USD as investors sought to benefit from the anticipated economic growth.

However, note that despite a strong jobs market lately, the unemployment rate in the US ticked up to 4.1%, the highest level since November 2021.

Nevertheless, global uncertainties, such as concerns over inflation, slow economic growth, and geopolitical tensions, often lead to capital outflows from emerging markets like India, and the US dollar, the world's reserve currency, is always a preferred choice. 

India is a major importer of crude oil, and rising global oil prices increase the country's import bill. This widens the trade deficit, putting downward pressure on the rupee. The oil import bill for India in FY25 is predicted to rise to $101-104 billion.

India's current account deficit has also been widening due to higher import costs and lower export growth, which may lead to a depreciation of the rupee against the dollar.

The Indian Rupee (INR) has shown some resilience despite its recent depreciation. The country continues to attract significant FDI, which supports the rupee. 

While rising oil prices have been a concern, any reduction in global oil prices will also offer support to the rupee.

Overall, the INR is likely to become stable against the USD, driven by RBI interventions and moderate oil prices. However, global economic conditions in the US will also play a significant role in determining the exact trajectory of the USD to INR rate

Source:

Livemint

Financial Times

Deloitte Insights

Exchange Rate Analysis for Other Currencies Paired with INR