It will be very difficult for USD to INR to show strength this year amid high inflation in the United States. Therefore, I expect US Fed to remain hawkish in 2023 to control inflations. Global equities have also been in an uptrend since the start of the year, along with strong economic data. Analysts are now expecting inflation to remain sticky in the near future. The January CPI data has shown a decrease in inflation but came out below expectations. The move can increase the demand for INR and decrease the selling pressure. More recently, the Reserve Bank of India has given the go-ahead to the banks of 18 nations to trade in Indian Rupee. As a result, Indian Rupee has also appeared as a viable option for many countries. What to Expect from RBIĭue to the current geopolitical scenario, many countries are now exploring more options for international trade. This put the interest at 6.5%, which is likely to slow the economy even more in the coming months. On February 8, RBI announced another rate hike of 25 basis points. However, the oil imports and the slowing Indian economy is still weakening the Rupee. RBI is increasing interest rates to strengthen the Indian Rupee. In the past few days, we have seen some EM currencies, like the South African rand, rebound as investors have embraced a risk-on sentiment. The USD/INR price has retreated because of the comeback of emerging market currencies. Nonetheless, the rates can stay elevated for the foreseeable future. Due to the ongoing issues with the banks, many analysts are now opining that the era of rate hikes might already be over. The March 2023 FOMC resulted in another 25 basis points rate hike. That’s why many analysts are looking toward Jerome Powell’s next move. DXY Index ChartĪ sudden Fed pivot could trigger a waterfall in DXY. However, due to a slight bounce in DXY, the USDINR pair is rising once again. This has resulted in strength in USD/INR pair within the past few weeks. Since the collapse of Silicon Valley Bank (SVB), the dollar strength index has declined by 3.62%. The DXY Index chart shows a weakness in the US dollar. Indian Rupee Gains Strength Amid Falling DXY

This can make US Federal Reserve adopt a dovish approach during the next few months. The core CPI inflation also came in line with the expectations of 5.5% on a YoY basis. The February CPI report, which was released on 14th March, met expectations as the YoY inflation came remained at 6%. The surging oil prices will keep the USD/INR exchange rate in check in the coming months.Īfter an increase in inflation in the first month of the year, the February CPI data showed decreasing inflation. However, The recent surge in oil prices has increased the import bill of India. The fall in the DXY index is strengthening Indian Rupee in terms of the greenback. This has led to a weakness in Indian Rupee. However, in its April 2023 meeting, RBI surprised investors by pausing the rate hikes. The increase in interest rates by RBI gave the Indian Rupee much-needed strength in terms of US dollar. Since the start of the year the US Federal Reserve and the Reserve Bank of India (RBI) have both remained hawkish. USDINR Historical Chart USDINR To be Affected By More Rate Hikes in 2023 The pair peaked at 83.28 in Oct 2022 but had a sharp correction afterward. The currency pair pulled back slightly and did not make a return to new highs until 2022 when rising inflation forced the Federal Reserve to start raising interest rates. Before attaining its all-time highs, the USD/INR tasted the 76.45 price mark in March 2020, just as the coronavirus pandemic was sweeping through the world.

The pair surged to an all-time high of 77.887 rupees in 2022. Between then and April 2002, it rallied by 376.41% to 48.76 rupees.Īfter retracing to 39.9 rupees in November 2007, the USD/INR has been on an uptrend since then. By late 1983, the currency pair rose past the psychological level of 10 rupees to the US Dollar. USD to INR trading dates back to 1973 when the pair was floated in the forex market at an opening price of $1 to 7.98 rupees. This has led to a surge in USD/INR exchange rate. Since the start of the year, US Fed has raised the interest rates by 0.5 bps in two FOMC meetings.

This volatility can be attributed to the US inflation data and the key decisions of the US Federal Reserve. Since the start of the year, Indian Rupee has remained highly volatile in terms of the US Dollar.

Us dollar to rupee