INR Price

INR, or the Indian Rupee, is a lot more than India’s official currency. While some might argue against it, INR does play a pivotal role in influencing several moves across the global economic realm. To be specific, INR is one of the few currencies to hold weight even beyond national borders. So much so that its relation with the USD has been a key analytical point for traders, investors, and policymakers; think of the year 1994 when you could buy one U.S. dollar with 31 INR. In 2024, the value is pushing 85 INR per dollar despite India’s breakneck growth. USD’s steady play as a global reserve currency, followed by high inflation spells, has often eroded INR’s purchasing strength. And that has often created scopes for folks keenly following the currency pair.

USD to INR: Economic Factors Affecting the Price Rate

The relation between USD and INR isn’t random. In fact, there are several economic facts impacting the exchange rate and the conversion outcomes.

1. India’s Inflation: India’s inflation has been a cause for concern. At 5.5% currently, which is a higher number than expected, the purchasing power of INR has decreased, making it weaker against the USD.
2. U.S. Interest Rates: The U.S. economy has been the most talked about financial enigma over the past couple of years. The interest/borrowing rates specific to the USD have been elevated, making U.S-specific investments more attractive. In comparison, the RBI has kept a lid on the repo rate at 6.5%, prioritizing steadiness over elevation. While it might sound like stability to some, it does make INR less attractive against the USD and, hence, weaker.
3. Global Uncertainty: Rocky markets push investors towards safety. And even in 2024, they end up leaning on USD for the same. We can take the Russia-Ukraine tension as an example. As inflation and oil prices surged, led by geopolitical uncertainties, INR quickly dipped to almost 76.5 in March 2022, as compared to 74.3 in January.
4. Trade Deficit: India, like any other country, relies on both imports and exports. However, in case of a trade deficit, where imports exceed exports, INR tends to feel the heat. For instance, India relies heavily on oil imports, for which it needs to pay in USD. This reliance typically ends up weakening the INR, as much as 79.3 in July 2022, from 74.5 in early 2022, courtesy of the $25.6 billion trade deficit.
5. Foreign Reserves: Trade deficits require countries to use up their foreign reserves. In India’s case, the trade deficit experienced in 2022 led to a sharp dip of almost $70 billion in foreign reserves. Do note that foreign reserves add strength to INR, and depletion can weaken it against USD.
6. Foreign Direct Investment (FDI): Higher FDI inflows can increase INR’s demand. This is the reason why INR was relatively stable during the COVID-19 pandemic, led by FDI inflows of over $81.7 billion. However, as the inflows slow down, INR tends to weaken.

USD/INR Forecast for 2025 and Beyond

Both long-term and short-term USD/INR forecasts hint at further weakening. According to Trading.biz experts, INR can move all the way up to 86.97 against USD by the end of 2025. This prediction is based on the expectations that the inflationary pressures will exist. However, if the feds keep persisting with the rate cuts, INR might continue to hold the 82–84 levels.
Considering the U.S. inflation remains steady, India’s reliance on oil imports, which is expected to increase, might end up pushing the 2026 USD/INR prices to anywhere between 89 and 90.5, per Trading.biz experts.
By 2030, sustained trade deficits can deeply erode the exchange reserves in India, which could take the INR prices to 101 even.

Disclaimer: These price levels are speculative and shouldn’t be considered financial advice.

Risks and Challenges Involved in Trading USD/INR

Traders eyeing the USD/INR pair might need to account for the following challenges:
Exchange Rate Volatility: The USD/INR pair is sensitive to global policy shifts. For instance, any move from the RBI or the Federal Reserve can lead to sudden swings.
Rate Differentials: It is important to keenly track the U.S. interest rates as if they are raised, investors might lean more towards the USD, weakening INR. But then, the rate cuts might just start looking promising for the INR.
Global Recession Risks: In case a global recessive environment ensues, the USD might just get stronger against the INR, as people consider the former as a “safe haven.”
Each element needs to be considered and tracked carefully, along with aspects like trade deficit numbers, global economic uncertainties, India’s reliance on Oil imports, and more.

Strategic Takeaways on USD/INR

INR weakening against the USD isn’t a phenomenon that’s set in stone. Instead, several factors are always at play, including U.S-specific interest rates, India’s repo rate, the status of imports, FDI inflows, and more. Imagine a sudden shift where the INR trades at 75 against the USD, led by a significant reduction in the country’s trade deficit, a surge in exports, and more. And even though all of that looks far-fetched, everything looks possible in theory, as nothing about the pair is random, and it all boils down to fundamentals and logic.