USD to INR Forecast

History of the USD to INR

The US and India are among the biggest economies in the world in terms of GDP. The US has a combined GDP of over $23 trillion while India recently overtook the UK to become the fifth biggest economy in the world after the US, China, Japan, and Germany. India has a GDP of over $3.5 trillion as of 2022.

The USD to INR is therefore an important currency cross because of the vast volume of trade that happens between the two countries. This volume started growing in the 1990s when India started to reopen its economy.

While India’s economy has been growing, its currency has been in a downward trend over the years. Today, it is trading at about 82 against the US Dollar.

The Indian rupee has dropped by 28% in the past five years against the U.S. dollar. It has also dropped by about 9% in the past 12 months even after the Federal Reserve and the Reserve Bank of India (RBI) have embraced an extremely hawkish tone.

The USD/INR pair is often influenced by a number of factors, including the actions of the Fed and RBI, economic numbers between the two countries, and global macro factors. It is also affected by the overall trade volume between the US and India, which averages over $146 billion per year.

Latest USD to INR forecast

After America’s inflation surged to a multi-decade high of 9.1% in June 2022, the Federal Open Market Committee (FOMC) decided to embrace its most hawkish tone in years. In 2022, the Fed hiked interest rates by 400 basis points and started implementing its quantitative tightening (QT) policy.

The RBI also took a moderately hawkish policy to fight inflation. It delivered several rate hikes as India’s inflation rose above its target of 5%. However, unlike the Federal Reserve, the RBI was not excessively hawkish because India’s inflation was not as bad.

India benefited from its government’s decision to promote the import of Russia’s oil and gas. As a result, while the rest of the world was buying oil for over $80 per barrel, India was buying Russian oil for less than $50. It then exported the same oil for huge margins, which explains why India’s energy companies generated strong profits during the year.

Meanwhile, the Indian economy had a strong year in 2022. This growth was partly because of its access to low energy prices. Another reason is that India benefited from the actions of Beijing. In 2022, China announced significant lockdowns, which pushed many companies to seek alternatives.

India was a better alternative because of its low cost of production and highly educated young people. Companies like Apple and Microsoft made investments in India. In all, the Indian economy expanded by about 8.3% in 2022 while the US expanded by 2.9%.

Fed and RBI outlook

The USD to INR price has resumed its bullish trend because of the outlook of the RBI and Fed. The RBI hiked rates by 0.25% in February 2023 and hinted that it was nearing the end of its hiking cycle. Besides, India’s inflation remains in a comfortable range.

On the other hand, in the US, the Fed is expected to be more hawkish after the country published strong economic numbers in February 2022 like retail sales increase by 3.0% and manufacturing production rebounds 1.0%. These numbers showed that the American unemployment rate plunged to the lowest level since 1953. At the same time, annual inflation remained above 6%, which is significantly above its target of 2%. Retail sales jumped at the fastest pace since 2020 in January.

Therefore, these numbers, mean that the Fed has more work to do to bring inflation downwards. In multiple reports, analysts at Goldman Sachs and Bank of America said that the Fed could keep hiking until June 2022.

The divergence between the Fed and the RBI will likely push the pair higher. In most periods, the US dollar tends to strengthen when the Fed is hiking.

USD to INR technical analysis

The daily chart shows that the USD/INR price has been in a strong bullish trend for months. This rally has consistently been supported by the 50-day moving average. The pair has also formed what looks like an ascending triangle pattern that is shown in blue. In most periods, an ascending triangle is usually a bullish sign.

However, this pattern can also be confused as a triple-top pattern whose neckline is at about 80. Therefore, a bullish breakout will only be confirmed if the pair manages to move above the upper side of the triangle at 82.96. If this happens, it will signal that there are still more buyers left in the market which will push it to the next psychological level at 85.

Transferring USD to INR

Demand for transferring USD to INR and vice versa is rising. For one, the overall volume of trade between the two countries has been growing. This trend is expected to grow as more American companies move their operations to India.

Another factor that helps India is the fact that the country has many educated young people who have many high-level skills that are needed by American companies. As a result, many American firms employ thousands of Indians remotely.

The volume of remittances to India has been growing, with most funds coming from the US and Gulf states. These remittances are expected to hit $100 billion in 2023. This will see the volume of USD to INR transactions rise.

That’s why money transfer services are gaining popularity for transferring funds across borders. The companies like WorldRemit, Wise, and XE can send money from the US to India. In addition, traditional money transfer companies like MoneyGram and Western Union can also be used.

The other popular option, especially when you are sending huge sums is to use a wire transfer. A wire transfer is where you direct a bank to send money to the other bank. Wire transfer is safe and affordable, but the process can take a long time to complete transactions.

Is it a good time to buy USD with INR

It is a good time to buy USD with INR because we expect that the greenback will continue to rise in the coming months. Indeed, history shows that the USD/INR pair only rises. Therefore, we can assume that this trend will continue in the next few years.

USD to INR 6 month forecast next 6 months – analysis

The outlook for the USD to INR for the next six months is bullish. As explained above, the Federal Reserve is expected to continue hiking interest rates in the coming months as inflation remains steady. On the other hand, the RBI will likely go slow on rate hikes.

Therefore, the US dollar index strength will likely continue. At the same time, the pair has formed an ascending triangle pattern, which is usually a bullish sign. As such, our base case is where the pair rises to about 85 in the next six months.

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