USD to INR Analysis & Commentary

Updated on 8 May 2024

The USD-INR exchange rate continued to fluctuate in April 2024, just like last month. The average USD to INR rate was around 83.41 and fluctuated between 83.88 and 82.66. 

The United States experienced economic recovery in April 2024, leading to an improvement in its domestic economic conditions. 

This recovery boosted investor confidence and attracted capital inflows, which exerted downward pressure on the Indian rupee against the US dollar.

The Federal Reserve held its most recent policy meeting on April 30th and May 1st, 2024. 

The Fed decided to keep interest rates in the 5.25% to 5.50% range for the sixth consecutive meeting. 

The Fed's decision to hold rates steady, instead of the anticipated hike, lessened the immediate strengthening effect the dollar might have had against the rupee.

Though rates weren't raised, the Fed hinted at future hikes if inflation doesn't show signs of improvement. This anticipation led to a gradual strengthening of the dollar over time.

The US releases various economic reports throughout the month regarding jobs, retail sales, manufacturing, etc. 

The positive reports could have strengthened the USD. Investors might be more confident in the US economy, leading them to demand more dollars. This increased demand pushed the USD value up relative to the INR.

However, the fluctuations in April 2024 were gradual and not significant as there were some positive aspects of the Indian economy as well.

The official GDP growth numbers for Q1 FY 2025 aren’t available yet. However, there are forecasts and projections from various sources. For instance, the Reserve Bank of India (RBI) projects Q1 FY25 GDP growth at 7.2%.

A strong GDP growth forecast for India could lead to higher interest rates in India to curb inflation, making INR more attractive to investors as well as increasing foreign investment due to a positive economic outlook.

The Indian Rupee (INR) also strengthened against the US Dollar (USD) after the release of India's HSBC Manufacturing Purchasing Managers' Index (PMI) data for April.

The PMI data for April came in at 58.8, which is still a positive sign for the Indian manufacturing sector, although slightly lower than the expected 59.5.

Overall, April 2024 painted a complex picture for the USD/INR exchange rate. 

While the USD gained appreciation, the INR remained resilient, gaining support and even managing to appreciate from time to time.

The USD-INR exchange rate is expected to remain volatile in the near future. The USD might strengthen due to the US economy, but the Indian economy's growth could support the INR too.

Source:

Livemint

RBI

The Hindu

Exchange Rate Analysis for Other Currencies Paired with INR

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