According to FXStreet data, the Indian Rupee (INR) is showing a slight downward trend as trading begins on Friday. The Euro (EUR) is currently trading against the Indian Rupee at 96.93, with the EUR/INR pair experiencing a decrease from its previous closing value of 97.19.
In the meantime, the British Pound (GBP) is being exchanged at 113.70 versus the INR during the early hours of European trading, also declining in value after the GBP/INR pair concluded trading at 113.76 in the prior session.
Indian economy FAQs
The Indian economy has sustained an average growth rate of 6.13% from 2006 to 2023, positioning it among the world’s most rapidly expanding economies. India’s robust growth has drawn substantial foreign capital. This encompasses both Foreign Direct Investment (FDI) in tangible assets and Foreign Indirect Investment (FII) by international investment funds in Indian financial markets. A greater influx of investment typically translates to heightened demand for the Rupee (INR). Variations in the demand for Dollars by Indian importing businesses also affect the INR.
India relies heavily on importing Oil and gasoline, making the price of Oil a significant factor influencing the Rupee. Because Oil is predominantly traded in US Dollars (USD) on global markets, an increase in Oil prices leads to a rise in overall USD demand. Consequently, Indian importers must exchange more Rupees to fulfill this demand, which tends to weaken the Rupee’s value.
Inflation’s impact on the Rupee is multifaceted. Ultimately, it signals an expansion of the money supply, which diminishes the Rupee’s intrinsic value. However, should inflation exceed the Reserve Bank of India’s (RBI) target of 4%, the RBI may increase interest rates to curb inflation by limiting credit availability. Elevated interest rates, particularly real rates (the margin between interest rates and inflation), tend to bolster the Rupee, making India a more appealing destination for international investors seeking to invest their capital. A reduction in inflation can support the Rupee. Conversely, lower interest rates can exert downward pressure on the Rupee.
India has consistently experienced a trade deficit in recent years, indicating that its imports surpass its exports. Given that the majority of international trade is conducted in US Dollars, there are instances – whether due to seasonal factors or order surges – where the high volume of imports results in substantial demand for US Dollars. During these periods, the Rupee may depreciate as it is heavily sold to meet the demand for Dollars. Furthermore, heightened market volatility can trigger a surge in demand for US Dollars, leading to a similar adverse impact on the Rupee.
