Two major actors in the world economy are the United States of America (USA) and India. The world’s largest economy is that of the USA. The GDP (Growth Domestic Product) of the nation reached around 25,46 trillion US dollars by 2022. The overall output produced inside a nation’s boundaries over a specific time period is measured by its GDP. Typically, GDP is calculated either annually or quarterly. However, when it comes to population size, India leads the world. The GDP of India was 3.071 trillion USD in 2022, according to data.
By obtaining its unique symbol (₹) in 2010, the Indian Rupee (INR) accomplished a noteworthy milestone that distinguished it from other currencies.This was a significant move that demonstrated India’s expanding economic influence on the world economy.
Over time, there have been significant swings in the exchange rate between the US dollar and the Indian rupee, or USD/INR. This rate’s historical patterns usually reflect changes in the dynamics of global trade, geopolitical developments, and economic trends.
The USD/INR exchange rate is influenced by a number of variables, including trade balance, global politics, commodity prices, and interest rate choices. It should be noted in this context that the price of oil is significant to both economies. India imports a substantial amount of oil. Additionally, the United States is both the biggest producer and user of oil.
The Indian Rupee has been a highly steady currency in 2023, with a price range of 80.9 to 83.6 levels against the US dollar. Let’s examine the variables that may affect the value of the currency pair in the future and make an estimate of where it might be in 2024. It should be noted that there is never a certainty that a financial instrument projection will materialize. All we can do is assume, and our prediction is based on important elements that usually affect financial markets.
Factors affecting the value of the USD
The US dollar is regarded as an international currency and is widely accepted around the world. Previous attempts by a number of nations, including China and the BRICS (Brazil, Russia, India, China, and South Africa) countries, to contest the USD’s hegemony as the world’s reserve currency have been unsuccessful. Usually, technical, fundamental, and global variables impact the value of USD. Let’s investigate these elements more.
Rates of Interest
Every currency’s value is shaped in large part by interest rates. Changes in these rates are a potent weapon that the central banks use to manage supply. People and companies are deterred from taking out bank loans when interest rates are high. As a result, the amount of money in circulation decreases and its value rises.
The US central bank, the Federal Reserve, has raised interest rates gradually in recent years in an effort to contain inflation. Interest rates were set at 0.25% at the start of 2022 and increased to 5.5% by the end of 2023. It is expected that the Federal Reserve will continue to pursue a stringent monetary policy until 2024 in order to continue addressing worries about inflation.
Financial Metrics
A few factors need to be taken into account in order to make predictions about the potential strength of the US dollar in 2024. First and foremost, GDP, which serves as a kind of economic health check for the nation. The US economy is enormous, valued at $25 trillion USD, and it continues to expand annually. In 2023, the GDP grew by 2 to 3 percent per month on average. But it rose further in November, reaching 5.2%. Estimates place the US economy’s growth around 2-4%.
Rates of Inflation
Up to 2021, the US economy experienced low and stable inflation. 2020 saw a rate of 1.2% inflation, 2021 saw 4.7% inflation, and 2022 saw 8% inflation. The epidemic and earlier low interest rates were the main contributors to inflation. Inflation is fueled by low interest rates because more individuals take out loans and have more money in their pockets. Since there are still issues to be resolved, like US elections and military engagements, the high rate of inflation is probably going to persist until 2024.
Balances of Trade
The trade imbalance in the United States has been steadily increasing over the last few years, reaching a historic high of 945.32 billion USD in 2022. Numbers for 2023 are not yet available, but trends point to the possibility that large trade deficits may continue. Let’s look at the historical statistics to gain a better understanding of how the trade imbalance has altered over the last few years. Between 2009 and 2013, the deficit was 393.77 billion USD and 446.86 billion USD, respectively, indicating a notable increase over time.
Given that it could depreciate the US dollar, the growing trade deficit is a serious threat to the American economy. The persistent increase in the deficit indicates that more money is leaving the nation than is coming in through exports.
Debt At present, the United States’ gross federal debt has surpassed 33 trillion US dollars, greatly outpacing the country’s whole GDP of 25 trillion USD. This 33 trillion US dollar gross national debt includes public debt as well as debt owned by government accounts and federal trust funds. Concerns about the USA’s fiscal health are raised by the stark difference between debt levels and GDP, which emphasizes the necessity for prudent financial management and calculated steps to reduce the country’s mounting debt.
Elections 2024 The US dollar’s value could be significantly impacted by the 2024 presidential elections in the US. International investors keep a close eye on the nation’s political changes in order to determine whether or not it makes sense to invest in US dollars. The decisions made on trade, monetary policy, and economic policies by the incoming government will have a significant impact on the value of the US dollar. It’s hard to tell at this stage what this mark will be or if it will be good or bad for the currency.
Global Elements
Given that the US spends billions arming and subsidizing its friends, the armed conflicts in Israel and the Ukraine will continue to put pressure on the US dollar. The government is compelled to raise the money supply since the increasing spending on weaponry leaves less money for the economy. The worth of each dollar will decrease if more is created to support nations engaged in conflict. These two battles are probably going to last until 2024.
Factors affecting the value of the Indian Rupee (INR)
The value of the Indian Rupee is established by a controlled floating exchange rate mechanism. This essentially indicates that the Indian central bank does not peg the value of the country’s currency to a fixed amount, but rather stabilizes it through interventions in the foreign exchange market. The Indian central bank employs both monetary policy and foreign reserves to manage the value of the INR. Let’s go over some of the main elements that affect the value of the Indian Rupee in greater depth.
India’s Inflation
Every economy must maintain a moderate and stable inflation rate because excessive inflation hurts commerce and business. For businesses, figuring out the ratios of income to expenses becomes challenging. Furthermore, in an environment of high inflation, creating financial plans for the next five or ten years becomes nearly impossible. Both the national currency and the economy are weakened by high inflation.
India’s annual rate of inflation:
Year: 2018; 2019; 2020; 2021; 2022
3.9% Inflation Rate3.7%6.6%5.1%6.7%
Compared to other economies, India has been able to maintain a more steady inflation rate. For instance, in 2022, the rate of inflation in the US was 8%, compared to just 6.7% in India. Since the Covid-19 Pandemic, there has been a significant global inflationary trend for the past few years.
Rates of Interest
Interest rates are a major factor in regulating the rate of inflation. The Indian central bank may raise interest rates in response to excessive inflation, which will lower the amount of money available to the economy. The more value Indian Rupees have, the less they are in Indians’ pockets. But there’s always a price to be paid when interest rates rise. Businesses suffer as the money supply declines because people begin to conserve money.
Raising interest rates helps to stabilize the local currency in the short run, but they have a negative long-term impact on the economy, which makes them detrimental to the currency’s value.
In India, interest rates were as low as 4% in the second half of 2020 and as high as 20% in 2022. But beginning in 2022, the rates progressively rose to 6.5%. The Indian economy continues to have difficulties due to rising inflation, which is why interest rates are expected to stay at roughly 6.5% in 2024.
India’s economic circumstances
Beginning in 2021, the Indian economy has grown at exceptionally high rates during the last few years. It should be noted, meanwhile, that India’s GDP growth rate in 2020 was -5.83%, while it was 3.87% in 2019. Growth Domestic Product, or GDP, is a metric used to express the entire amount of output generated by an economy. GDP figures are typically shown as quarterly, monthly, or annual data. The economy is doing better when the GDP is higher. Furthermore, a strong economy can shield its currency. An excellent year for the Indian economy was 2023. With more than 1.4 billion inhabitants, India is the world’s most populous country and a major importer of oil. Although not as dramatically as many experts had predicted, Russia’s war in Ukraine raised energy costs globally. Nevertheless, certain nations, including China and India, benefited from lower prices as a result of western sanctions. Europe now has very little access to Russian energy, thus the nation made every effort to locate consumers of alternative energy.
The trade balance of India
The value of the national currency can be significantly impacted by the trade balance. The local currency benefits from a favorable trade balance and vice versa. India’s trade balance has often been negative, with the exception of 2020, when it was zero. India’s trade balance is currently around -31 billion US dollars. India has a tendency toward a growingly negative trade balance, and it is expected that this trend will continue until 2024, which will be detrimental to the local currency.
Debt: India’s national debt has been steadily rising over the past few years, and this trend is probably going to continue through 2024. India has a national debt of 1.595 trillion US dollars as of 2018. Additionally, as of 2021, the debt totaled about 2.36 trillion US dollars. Large national debt puts pressure on local currency since governments usually print additional money by borrowing when payments are due, which lowers the value of local currency.
Chart of US dollars against Indian rupees
Let’s now examine the US dollar versus Indian rupee chart. We can see that there is a flag pattern on a weekly timeline, where each candle symbolizes a week. Larger timeframes than a day are often preferable for patterns because there is less noise to interfere with the formation of the pattern.
The pattern indicates that the USD/INR pair is trending upward, and it is anticipated that the price will rise in a manner at least equal to the flagpole’s size. It should be noted, nevertheless, that the price’s advance after breaking over the resistance level was not as powerful as anticipated, and there’s a possibility that the price will go back to test the resistance level. If the price stays above the 83.30 mark, it may serve as a solid support level for the whole of 2024.
The pattern indicates that the USD/INR exchange rate will probably fluctuate between 83.30 and 92 levels. On the other hand, the previously listed fundamental elements must also be taken into account while making predictions.
usdinr Closing Statements
To forecast the potential value of the USD/INR pair in 2024, we must consider the key factors influencing both nations and their respective currencies.
The world’s greatest population is found in India. Furthermore, there are a lot of young people in the nation who can work and support the expansion of the economy. Compared to other nations, the Indian central bank has done a better job of shielding its people from the high rate of inflation throughout the world. However, as a major energy consumer, India has a developing negative trade balance and its economy is influenced by the price of crude oil globally.
Regarding the US, it boasts a robust economy and a low unemployment rate. Nonetheless, a number of significant factors will exert pressure on the US dollar in 2024. In addition to the US’s rapidly increasing gross national debt, which is currently at just over 33 trillion USD, the US has an ever-widening negative trade deficit that will cross the -945 billion USD threshold in 2022. In addition, the United States will hold elections in 2024, and international events like the wars in Israel and Ukraine will hurt the value of the USD.
Technical analysis indicates that the INR is going to perform worse than the USD, despite the fundamentals suggesting otherwise. Taking everything into account, it is most probable that the USD/INR pair will fluctuate in value for the whole year of 2024, maybe hitting values of 80 or 87.
