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Trading USD/INR

Written By

James Barra

Written By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Edited By

Jemma Grist

Edited By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Sep 14, 2024

The USD/INR currency pair is a popular choice among traders looking for a safe haven. The USD is the most traded currency on the international forex market while the INR is the 17th most traded. Interestingly, the INR is somewhat protected from volatility by the buying and selling of USD/INR by the Reserve Bank of India (RBI).

This tutorial will break down key insights needed to speculate on the USD/INR, including the benefits of live trading the dollar against the rupee, economic factors to consider, how to measure exchange rate value, reading candlestick charts, and more. We have also listed the top supporting brokers.

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USD/INR Meaning

The USD/INR currency pair is simply the value of the US dollar against the Indian rupee. The forex pair tells the trader how many rupees (the quote currency) are needed to purchase one dollar (the base currency).

Why Trade USD/INR?

The USD/INR is a popular option out of the exotic forex pairs. As India’s economy and the business climate continue to develop and grow, the currency’s outlook is improving. Investing in the pair has become an attractive opportunity for forex traders.

• Popularity – The USD is the most traded currency on the FX market. It accounts for approximately 87% of all foreign exchange transactions. The INR is the 17th most traded currency worldwide, with approximately $58 billion worth of INR exchanged daily.
• Safety – The USD is considered to be the world’s most stable currency. The bulk of global foreign-exchange trading involves the USD.
• Protected from volatility – When trading USD/INR, the Indian rupee trades on a ‘managed float’. This means the INR spot rate is market-determined but somewhat protected from volatility by the buying and selling of USD/INR from the Reserve Bank of India (RBI).
• Prevalence – The USD is one of the most popular reserve currencies. Its size leads to an abundance of historical exchange rate data on the pairing available for download from the likes of the NSE, even 20-year charts. This also makes it relatively straightforward to follow.

History Of USD/INR Exchange Rate

Today, the Indian currency’s value is lower than the USD, but this was not the case before. When India became independent in 1947, the situation was very much different. 1 INR used to be equal to 1 USD.

There are multiple arguments about why 1 USD/INR in 1947 held more value. But, it is most commonly believed that there was no metric system. This meant all currencies held the same value.

Others believe that before 1947, India was a British-ruled state, so the value of INR was higher because the value of GBP was higher. It is believed that 1 pound was equal to 13.37 rupees in 1947, and that’s why the value of USD should be INR 4.16 in 1947.

Since India’s independence in 1947, the value of INR against USD has consistently gone down. The US federal fund rates have mainly been flat at around 0.25% in the last ten years. This also plays a role in the current value of INR to USD.

Why USD Is Stronger Than INR

The USD is stronger because it is kept by most global central banks in reserves. A large share of international transactions is also done with the dollar. The durability of the USD against INR also comes down to the strength of the US economy – people want to hold the US dollar because it is considered safe.

The Reserve Bank of India (RBI) also often buys US dollars from the market. This causes a rise in rupee liquidity. The increase in the supply of rupee without a corresponding demand then makes the rupee depreciate further against the dollar.

That said, there have been times when the strength of the USD/INR has switched. In the past, a record inflow of dollars through Foreign Portfolio Inflows (FPI) and other modes have increased the demand for the rupee. This has led to the rupee rising against the US dollar.

USD/INR Forecast

When investing, it is important to have a good idea of future trends and predictions for tomorrow. You can view today the USD INR pair by looking at the latest news and charts to see its performance.

The USD has outperformed the emerging-market Indian rupee over the past few years. The stabilization in the currency pairing has been partly down to intervention from the Reserve Bank of India (RBI).

The USD to INR reached its highest rate ever in May 2022, amounting to 77.89 INR. However, the all-time low was established in March 1973 at 7.19 INR.

The US Economy

The United States’ economy is the largest in the world. It is worth knowing the make-up of the US economy and what influences the USD, to implement an effective strategy when trading the FX pair.

• Like any other fiat currency, the value of the USD depends on the economic activity and outlook of the United States.
• The largest contributor to the US economy is its service sector. This includes finance, real estate, insurance, professional and business services, plus healthcare.
• The US has a relatively open economy. This means it can facilitate flexible business investment and direct foreign investment in the country.
• The USD can be influenced by labor market data. This includes non-farm payroll (NFP) results, unemployment levels, GDP and inflation data, as well as interest rates set by the Fed.
• The value of the USD on the world market can also be influenced by market psychology and geopolitical risk that varies at different times.

The Indian Economy

India’s economy has experienced rapid growth thanks to its farming and services industries. Understanding its drivers will help you make informed decisions when investing in the USD/INR.

• India is the sixth-largest global economy. It also has one of the largest populations among nations, with more than 1 billion inhabitants.
• India has a diversified economy largely based on services, industry, and farming. Many of India’s workers rely on agriculture.
• Services, such as IT, business outsourcing, and software, account for about 50% of India’s economic growth.
• India’s economy has been fairly liberal since the 1990s. This has helped to boost economic growth over the last two decades.
• However, inflexible business regulation, widespread corruption, and ongoing poverty are a few examples of events that often prevent the Indian economy from expanding further.
• Financial analysts are also saying that high oil prices will create short-term turbulence. However, India is less affected by the Ukraine conflict because of its geographical placement. New infrastructure spending and policies coming in 2023 are set to boost the country’s economy.

Note that high US Fed interest rates tend to attract investment away from emerging market countries like India. This is because investors seek rising returns in the US.

Measuring USD/INR Value

The value of the USD/INR can be measured by the U.S. Dollar Index (USDX). This is made up of a range of currencies affiliated with the major trading partners of the United States. These include the Euro (57.6% of the index), the Japanese Yen (13.6%), the British Pound (11.9%), the Canadian Dollar (9.1%), and the Swedish Krona (4.2%), and the Swiss Franc (3.6%). The index goes up when the USD gains strength against these currencies and falls when it weakens.

Yearly averages and charts vary, but following the USDX is a great way to stay on top of market sentiment.

Reading A USD INR Candlestick Chart

There are many different types of live forex charts available on trading platforms. However, a daily or weekly candlestick chart is often what investors find most useful when trading USD/INR. Price history charts are available at many top brokers, such as Oanda, and can give a view of yesterday’s price as well as future exchange rate forecasts.

A candlestick chart is essentially a graph used to analyze the spot rate movements of currencies, such as USD/INR futures, securities, or derivatives. The technical chart represents four key pieces of information over a certain time frame – the open and the close and the high and the low.

Here are five key facts that will help you to read a live USD IND candlestick chart:

1. The ‘what’ (meaning USD/INR price action) is more significant than the ‘why’ (i.e., current earnings, news today, etc.)
2. All the present and available information is reflected within the price
3. Sellers and buyers can move markets based on anticipations and emotions, such as fear and greed
4. Forex markets tend to fluctuate
5. The real price might not reflect the underlying value

Importantly, if you set a USD/INR candlestick chart to a 30-minute time period, each candle will form over 30 minutes. If the candlestick chart is set to a 15-minute time period, every candle will form over 15 minutes.

USD to INR charts can span 10 years or 20 years, or you can get graphs for 5 years. They can show the day’s highs and lows, USD versus INR trends, and forecasts for tomorrow and provide direct quotes via the trading platform. Support and resistance levels can also be plotted.

Leading brokers also convert research reports into user-friendly trading materials and provide recommendations as to what today’s USD to INR trend may be. Live, daily, and weekly forecasts are also commonplace with quarterly and monthly averages, market watch lists, and user-friendly pip calculators. For money control, volatility indexes, and forward premiums, you may need to consult the broker’s support team.

When you trade USD/INR, you must also take into account the hedging cost, USD INR closing rate, swap rates, spreads, commissions, and other fees your broker may charge.

Find out more about forex trading technical analysis and strategies.

Final Word On Trading USD/INR

The USD/INR forex pair offers good opportunities for traders looking to get involved with exotic pairs. The INR is somewhat protected from volatility, and the USD is considered to be the most stable currency on the market. But before you start margin trading, it is important to understand what influences the USD/INR exchange rate and the strength of each economy. Use our guide to get started.

FAQs

How Do I Trade USD In INR Options?

If you are expecting the USD to INR live pair to move up (the dollar to appreciate), then you can buy a call option on the USD v INR pair. If you are expecting the USD to INR conversion to move down (the INR to appreciate), then you can buy a put option on the USD/INR pair.

Is IND/USD A Restricted Currency?

The IND is often considered to be a restricted currency. Fund transfers in this currency are typically not allowed outside of India, though online trading offshore is still possible.

What Is The Highest Ever USD To INR Rate?

The USD INR all-time high was reached in May 2022, at 77.89 INR to USD. See the latest price chart for the exchange rate today.

How Is The Volatility Of USD/INR Calculated?

The historical volatility of USD/INR is calculated by looking at the change in value over time. The basic period for a prediction is often a one-day change, though you can use a 1-week or 1-month change. You can use a USD/INR graph to map this out. You will also need to determine how many periods you plan on investing in the forex pair when making the calculation.

What Happens If 1 USD = INR?

If 1 USD = INR, then India, in the short-term at least, would likely feel wealthy. Many forex traders that caught the trend of USD-INR exchange rate would probably make large profits. However, in the longer term, the economy may suffer as foreigners wouldn’t be able to afford to invest or travel to India. Imports would rise, and so too would unemployment.