USD/INR – ForexUSDINR
The Forex quote that defines the U.S Dollar relation against the Indian Rupee is given by USD/INR, where USD is the base currency, and INR is the quote or counter currency. The USD/INR pair is not a popular trading currency pair as it represents USD as the leading global currency, while the INR indicates an unstable but developing Indian economy.
The USD/INR is considered a minor pair in the Forex market due to its fairly small trading volume. The vast difference in the monetary decisions of U.S and India means that it is difficult to accurately predict the price movement of the USD/INR pair. There is quite a high risk involved when trading the USD/INR pair, and the pair is usually a focus of trading among traders and investors in the Indian Forex markets.
The USD/INR pair shows how many Indian Rupees will be needed to buy one U.S Dollar. For instance, if the current exchange rate of USD/INR is 75.64, it shows 1 USD equals 75.64 INR; in other words, a trader would need to pay 75.64 Indian Rupees to buy 1 U.S Dollar. The Rupee is considered to be the 20th most popular traded currency in the world. However, in the USD/INR pair, the U.S Dollar has always been significantly stronger in value as compared to the Indian Rupee.
History of USD/INR Currency Pair
The U.S Dollar also called the ‘Buck’, and ‘Greenback’ is the world’s most leading currency and also the first reserve currency. The USD is valued all around the world, and apart from currency pairings, some of the commodities such as oil and gold are also priced in U.S Dollars. The USD represents a strong and stable American economy, and the Gross Domestic Product (GDP) of the U.S is equal to 23% of the global GDP.
The Indian Rupee shows a quite rapidly growing Indian economy, but the GDP per capita is still quite low as compared to other developed countries. Agriculture and services contribute the most to the nation’s income. India is the second most populated country after China, with an estimated population of 1.35 Billion, and its workforce also plays its part in the development of the country. India has gradually shifted its focus towards a free market system, and the government emphasizes on foreign investment and foreign trade.
The U.S. has strong diplomatic and trade relations with India. Statistics show that India imports 1.5% of total exports of the U.S, on the other hand, the U.S imports more than 15% of total exports of India. The goods that the U.S exports to India include machines, electrical equipment, pharmaceuticals, and vehicles. While the components that India exports to the U.S include precious stones, minerals, apparel, rice, and organic chemicals.
The Indian economy is still developing, and many steps have been taken by the Indian government to improve the economy and the worth of Indian Rupee. India is usually seen as a cash-based economy, but many times people have been noticed circulating fake currency, however, the Reserve Bank of India has taken strict measures to secure the currency notes. The all-time maximum value of the USD/INR pair was 69.528 on August 28, 2013, and the minimum value was 1.30 in 1948.
How to Trade USD/INR Pair
The USD/INR is traded 24/7 from Monday to Friday, and the pair is closely monitored by the traders and investors in the Indian Forex markets. The USD/INR pair can be traded through spot trading, Future contract, and by Contract of Difference (CFDs). Of these three options, trading CFDs is becoming a popular trend as it allows the trader to speculate the price movement of the underlying asset without having to own the currency. With CFDs, traders can also use leverage which means that a trader can make a small initial deposit and then open a larger trading position.
Trade can trade in both directions using the CFDs and either go Long and Short. For instance, if a trader believes that USD will gain value against INR, then he will go long or Buy, and conversely, if a trader thinks that the USD will depreciate in front of INR, then he would go short or sell. With CFDs, there is a chance to maximize the profits but equal chances of losses, so a trader may want to apply stop loss to reduce the risk.
How to read the Price Change in USD/INR Pair
The performance of the USD/INR is influenced by the correlation among the domestic economy of the U.S and India. The USD/INR pair is not widely traded in global Forex markets, but Indian traders can use the USD/INR pair to diversify their portfolio.
If we take a look at the price chart of the USD/INR pair, we see the pair trading between the values of 69.00 to 72.00 from August 2019 to March 2020. The USD/INR pair reached a high value of 76.42 on March 23, 2020, and then a low value of 74.49 on April 30, 2020. Currently, the USD/INR pair trades on 75.378. The Bid price or is 75.325, while the Asked price is 75.430.
If the quote of USD/INR rate rises, then it means that USD is stronger in value against the INR. Similarly, when the rate of USD/INR pair declines, it shows that USD is losing value in front of INR. If we examine past prices of USD/INR pair for the last five years, then the USD/INR pair reached the lowest value of 63.178 in January 2018 and the highest value of 68.9 in February 2016.
What causes price change in USD/INR pair?
The economic factors and indicators that heavily influence the Indian Rupee and the subsequent USD/INR pairing are investment flows, trade balance, oil prices, inflation, Gross Domestic Product (GDP), and financial decisions taken by the U.S Federal Reserve Bank known as Fed, and Reserve Bank of India (RBI).
The main emphasis of the Fed is to control the monetary policy, release the economic data every month, setting the interest rates, and keeping the unemployment rate to the minimum. On the other hand, the focus of RBI is to issue and control the supply of Indian Rupee. The RBI also releases timely financial information on the Indian economy and sets the interest rates. When trading the USD/INR pair, there is usually a Bullish USD trend is seen.
Due to the slow growth rate in the economy, the Indian Rupee will further reduce in value against the U.S Dollar. The current trade balance is another critical indicator of the value of the USD/INR pair. The trade balance shows the difference between the imports and exports of the goods and services. A negative value shows a trade deficit, while a positive value means a trade surplus. The trade balance usually generates the volatility of the USD/INR pair.
The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.
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