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The Indian Rupee’s Current Outlook in 2022
Following a sustained long-term downtrend over the past decade, 2022 resumes a bearish outlook for the Indian rupee (INR).
Rupee weakness has accelerated this year, best illustrated by its dramatic all-time low (82.77) printed against the dollar in October. However, the rupee’s 8.36% decline against the greenback since January is consistent with the weakness experienced by most dollar-paired currencies.
This is largely a consequence of macroeconomic factors bolstering dollar strength. A hawkish U.S. Federal Reserve (Fed) and global inflationary pressures have boosted the dollar relative to its rival currencies. The dollar’s safe-haven status has helped, encouraging capital flows into the U.S. amid geopolitical uncertainty and fears of a global economic slowdown.
It’s likely the current inflationary climate—in addition to India’s widening $100 billion trade deficit—will propel further rupee weakness into 2023 and beyond.
The following investigation into factors that influence this currency pair will also include IND vs USD forecasts over a variety of time horizons.
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U.S. Dollar Performance and Drivers in 2022
September saw a surging dollar make its yearly high of 114.10, a 14% increase in value compared to its basket of challenger currencies. According to the ICE Dollar Index (DXY), a barometer of dollar strength, the buck has achieved its greatest gains since 2002.
A currency’s strength or weakness cannot be determined in isolation. The index—an effective dollar performance measure—reflects its strength or weakness relative to a selection of competing currencies: the British pound (GBP), Canadian dollar (CAD), euro (EUR), Japanese yen (JPY), the Swedish krona (SEK) and the Swiss franc (CHF).
Although fears of a recession have reduced the dollar’s 2022 high to 11.87%, its overall strength also reflects a more favorable outlook for confidence in the U.S. economy in relative terms.
Skyrocketing inflation has also been a key driver behind dollar strength, prompting six Federal Reserve interest rate increases in 2022. Such monetary policy decisions are intended to curb inflationary pressure, making it more expensive for people to borrow and spend. However, higher interest rates also make the dollar more attractive for investors while encouraging people to save.
While current inflationary pressures in the U.S. are at a 40-year high, other factors have also contributed to increased dollar strength.
The geopolitical uncertainty caused by the war in Ukraine, dramatically increasing energy costs and labor shortages propelled by the “great resignation” have collectively contributed to soaring prices, prompting a U.S. Consumer Price Index (CPI) forecast of 8% for the year. This further demonstrates the dollar’s counter-cyclical nature and its destination as a flight to safety for capital inflows.
USD to INR Forecast
The following INR USD forecasts are based on currently available data. The forecasts could be revised or proven entirely wrong depending on the extent to which key factors, such as central bank policy and interest rates, are in line with market expectations. Conduct your own research and remember that past performance does not guarantee future results.
Rupee to Dollar 6-Month Forecast
Better-than-expected CPI figures released by the U.S. for October have provided a short-term reprieve for the rupee versus the dollar. An October decrease in the rate of inflation to 7.7% (from 8.2% in September) exceeded expectations.
This prompted investors to swap dollar safety for riskier asset classes amid the reduced likelihood of further Federal Reserve interest rate hikes. The dollar plunged 2.27% in value in its steepest 48-hour decline since 2008. In turn, the rupee gained dramatically in strength against the dollar, providing a positive INR to USD forecast.
However, this rupee gain may only be temporary. Some longer-term forecasts regard it as a correction in long-term dollar strength against the rupee. Accordingly, it is likely the rupee will endure continued weakness over the next six months, gradually giving back its gains against the dollar.
INR to USD Long-Term Forecast
Given the strength of the prevailing trend and the current inflationary climate, it’s likely the rupee will continue to weaken long-term. This argument is supported by Al Pickup, which projects the rupee will continue to weaken until 2027. The service, which uses AI algorithms, projects 88.17 rupees to one dollar in 2025 before ranging between 90 to 92 until 2032.
The sentiment is consistent with Investing Cube, which predicts one dollar to equal 86.97 rupees by December 2025. A more bearish, longer-term outlook for the rupee is provided by Wallet Investor, which projects 91.78 as a maximum rate in November 2027.
Where can I exchange USD to INR?
Shop around to avoid paying huge fees, which vary greatly between traditional bricks-and-mortar and online challenger banks. The following are a few popular places to exchange USD to INR.
- MoneyGram International. Trusted by over 150 million customers worldwide, MoneyGram offers the most competitive rates on dollar transfer amounts between $1,000 and $10,000.
- Wise.com. Formerly known as TransferWise, this financial technology company tends to offer more competitive rates on amounts of $50,000 and above. It might outperform on transaction speed, although as it is fully digital, there are no deliveries of physical cash.
- Western Union. Established in 1851, this heritage brand remains highly competitive and offers the most cost-effective rate over various amounts. This typically includes, but isn’t limited to, amounts less than $200.
Bear in mind, the quoted exchange rate will likely differ depending on how much money you wish to exchange. Therefore, a vendor offering the best rate for exchanging $100 might not offer the best rate for exchanging $1,000.
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Frequently Asked Questions (FAQs)
Why is the Indian rupee dropping against the U.S. dollar?
Continued rupee-dollar weakness is largely a result of a hawkish Federal Reserve. It has buoyed investors seeking safety amid surging inflation in a world of “unknown unknowns.” After multiple rate hikes in 2022, the interest differentials between both countries’ central banks have been steadily decreasing.
Will the INR vs. USD go up or down in 2022?
There is currently only a 1.9% difference between the 4% and 5.9% base rates set by the Federal Reserve and the Reserve Bank of India, compared to 3.75% at the start of 2022. This, in addition to a more favorable U.S. economic outlook and the International Monetary Fund’s lowering of India’s growth forecast to 6.8% makes the dollar more attractive for investors.
Will the rupee get stronger against the dollar in 2023?
Given the dollar’s strength in 2022 and multiple long-term bearish forecasts for the rupee, it is likely to continue weakening. However, it is important to consider that forecasts are often subject to revision and can be incorrect. The rupee’s prospects against the dollar are based on the rate of inflation, central bank policy and the fortunes of the U.S. and Indian economies.
The above forecasts were determined shortly before this article’s publication date. Competitive rates could have changed, owing to market fluctuations and volatility.
