Understanding USD To INR Exchange Rate Fluctuations

usd-to-inr-guide

The USD to INR exchange rate has fluctuated significantly over the years. Over the past three years, specifically, the gap between these two currencies has gotten smaller. If you are interested in learning more about the USD to INR exchange rate, why it fluctuates and how this effects and reflects the state of the economy, keep reading below. You will be surprised to find that it is not much different from the relationship between 1 AUD to USD.

What Is USD?

USD stands for United States Dollar. This is the currency used and backed by the American government. The dollar is the world’s primary reserve currency. Reserve currency is the money held in significant quantities by governments and institutions as part of their foreign exchange reserves. Many other countries use this as their official currency as well. Rather than holding actual financial weight like silver and gold coins, the U.S Dollar receives its value from the support of the United States government.

What Is INR?

INR stands for Indian Rupee. The Indian Rupee is the official currency of the Republic of India. However, rupees are also used as currency in a variety of other countries such as Pakistan and Nepal. The Indian Rupee can be subdivided into 100 paise, similarly to how the American dollar can be divided into 100 cents. Prior to the use of paper rupees, India utilized silver coins as their means of currency.

What Is An Exchange Rate?

The exchange rate is, essentially, the price of one nation’s currency in comparison to another. There are several factors that influence the exchange rate including inflation, interest rates, political stability and market data regarding trade rates. Today, the exchange rate between the Indian Rupee and the United States Dollar is approximately 0.68 INR to 1 USD. This means that you would need approximately 1 and 1/3 Indian Rupees in order to have the equivalent value of 1 American dollar.

Why Does It Fluctuate?

The exchange rate between any two currencies is bound to fluctuate. This is primarily because the underlying factors behind the exchange rate, such as those listed above, are bound to change over time. Political stability and military power, for example, could change in times of war. Additionally, other less violent aspects of the exchange rate include trade. The amount that a country imports versus how much it exports will make a significant difference in its currency value. When a country exports more than it imports, it is more likely to have a stronger currency. All money is valued based on the profitability and trust in a particular government.

When Will It Change?

The USD to INR exchange rate is not set in stone. Many economists have been able to approximate how they think the exchange rate will change over time. The “forecast” can be found online, listing day-by-day how much the rupee is worth in comparison to the dollar. Overall, it is expected to stay about the same throughout this year. However, in the years to come it is expected that the rupee may rise in value.

The USD to INR exchange rate is just one example of a complex world economy. It is important to understand the individual currency and respective governments when determining an exchange rate. Only then can you take into account the many factors involved.

Photo from http://www.india.com/business/inr-to-usd-forex-rates-today-rupee-steady-at-66-74-vs-usd-in-late-morning-deals-1376603/

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