What is USD/INR?
The USD/INR forex pair refers to the exchange rate between the US dollar and the Indian rupee.
The Indian rupee (symbol: ₹, code: INR) is the official currency of the Republic of India. It is issued and controlled by the Reserve Bank of India (RBI), which is the country's central banking institution. The Indian rupee is further subdivided into 100 smaller units called paise.
The United States dollar (USD) is one of the most prominent and widely recognised reserve currencies in the world. The US Federal Reserve (the Fed) is responsible for issuing and managing the supply of US dollars. It prints physical currency (banknotes) and manages the digital currency in circulation.
What affects the price of the USD/INR pair?
India is a major oil importer, and therefore fluctuations in oil prices can impact its trade balance and foreign exchange reserves, which in turn can affect the INR and the USD/INR exchange rate.
Monetary policy decisions and differences in monetary policies announced by the US Federal Reserve and the Reserve Bank of India can also affect the pair. If one central bank is tightening policy while the other is easing, it can impact the relative strength of the currencies.
Higher interest rates in one country compared to another can attract foreign investment and potentially strengthen the currency with higher rates (appreciation). Conversely, lower interest rates can weaken a currency. Another factor that can weaken a currency is inflation. High inflation can erode the purchasing power of a currency and lead to its depreciation. Central banks might respond to high inflation by raising interest rates, which could impact the exchange rate.
What to watch out for when trading USD/INR?
When trading the USDINR forex pair (the US dollar against the Indian rupee), there are several factors to watch out for. Here are some key considerations:
- The US Federal Reserve and the Reserve Bank of India (RBI) monetary policy decisions such as interest rates that aim to tackle inflation
- US and India’s Inflation figures as shown in the Consumer Price Index (CPI) growth.
- US and India’s Employment Data
- US and India’s Trade Balance
- US and India’s Gross Domestic Product (GDP)
- Oil Prices