The Indian rupee has been steadily depreciating. In fact, over the next six months, the Indian currency is expected to weaken even more as the country heads into May’s national elections to choose its new prime minister. Although the USD to INR forex rate is expected to increase from 72 to 75 next year, the long-term earning potential for the US dollar vs Indian rupee pairing is estimated to be a little over 5%.
What does this mean for investors? Now is a good time to buy the currency while the price is low. There are many reasons to believe the rupee may recover and appreciate, closing the dollar to rupees gap in 2019.
5 REASONS WHY THE INDIAN RUPEE MAY BE WORTH ADDING TO YOUR PORTFOLIO THIS YEAR
Although the dollar to Indian rupee rate is progressively getting wider, here are five reasons to reasonably speculate that the dollar vs rupee conversation will change in 2019.
- The Current Depreciation of the Indian Rupee is Only Due to Temporary Changes in the Global Economy
- As the Indian Economy Continues to Grow, the Rupee Should Recover
- The Growing Economy Will Attract Foreign Investors and Change the Dollar Rate in India
- Economic Growth in India Will Forecast Overall Economic Improvements
- India’s Growing IT Market Sector and Increased Global Technical Outsourcing Will Affect the Indian Rupee to US Dollar Rate
Let’s take a closer look at the details of these five reasons why the rupee is likely to appreciate.
The Current Depreciation of the Indian Rupee is Only Due to Temporary Changes in the Global Eeconomy
Currently, the Indian rupee is in depreciation and analysts expect this cash crunch based on India’s unfavorable us dollar to Indian rupee exchange rate to continue to increase. For this reason, now is the best time to get a large number of rupees for a bargain price. When the rupee recovers, you’ll then be in a position to benefit from your investment.
There are a few global macroeconomic reasons why the rupee is currently falling in value after making impressive Indian rupee to dollar gains in 2017.
The Higher Price of Crude Oil
India is heavily dependent on crude oil, only behind the United States and China in consumption. For the past 4 years, crude oil prices worked favorably with the rupee exchange rate. However, the rise in crude oil prices affected India’s GDP in 2018, decreasing it by about 0.3 percent. In addition, President Trump has asked US allies, which includes India, to stop importing oil from Iran. This means India will have to pay more for its oil. Although the US President has set new terms and conditions for Iran in an effort to economically hurt that country, his reasons for punitive sanctions are far from clear, which means that the situation could change again.
A Hike in the US Federal Reserve Rate
The US economy has continued to flourish after the corrections that ended the financial crisis in 2007-2008. The federal reserve has changed its terms to reduce inflation and encourage domestic economic growth, raising its rate from 1.75% to 2%, an upward revision of 25 basis points. This change in terms has had a global impact, including affecting the US dollar to Indian rupee rate. Today it costs more rupees to buy a dollar.
The US Trade War with China
President Trump’s trade war with China has affected more than just these two countries. Consequently, India will pay more in dollars to China for importing Chinese products because the dollar rate in Indian rupees is now higher.
Although current business news continues to forecast hard times for India’s economic growth, they fail to consider that many of the factors that are currently forcing the Indian rupee to depreciate are transactional more than anything else. It’s reasonable to assume that in 2019, many economic and political policy changes will occur to reset current trading risks and imbalances across the globe. For instance, President Trump’s tariffs and other country’s retaliatory tariffs are not sustainable. This means that if you purchase a large number of rupees while the price is low, you will get ahead of institutional investors whose concerns are primarily with currency fluctuations occurring now. While the US dollar to Indian rupee rate today does not look favorable for rupees, there are many reasons why the Indian rupee will get stronger, allowing you to make money by buying low and selling high.
As the Indian Economy Continues to Grow, the Rupee Should Recover
India’s economy is continuing to grow at a predictable average rate for a large number of reasons. India has a stable democratic government. Its growing population will increase consumer demand and stimulate the growth of new businesses. Furthermore, India’s improving standards of higher education will increase the number of professionals in the country (doctors, lawyers, engineers, computer scientists, IT technicians, etc.) The country already has a well-developed infrastructure and industrial sector and there are no political, economic, or cultural reasons to assume this economic growth will not continue.
The Growing Economy Will Attract Foreign Investors and Change the Dollar Rate in India
As India’s economy grows, there will be greater confidence in the country, and this will improve domestic productivity and attract foreign investment. When a country enjoys economic growth, it causes an appreciation of the exchange rate because interest rates are likely to rise. Some of this economic growth will increase exports, which will trigger the currency to rise.
As a result of growing confidence in securities, the value of the rupee will appreciate. A stronger rupee will increase the price of Indian goods and services in overseas markets, resulting in more dollars pouring back into India to fund new domestic enterprises.
Economic Growth in India Forecasts Overall Economic Improvements
A burgeoning economy based on industrial growth will change many macroeconomic conditions, like the balance of payments, inflation, interest rates, and fiscal and budget deficits. As these improve, other factors in the country will improve, too. There will be increased internal and external political stability, and an improvement in government services, health care, and education.
These positive changes will affect the attitude of investors, both domestic and overseas. Foreign investors will have more faith in India’s financial markets. Since this will increase the demand for rupees, it will decrease the number of rupees in circulation. Consequently, the rupee will appreciate in relation to the dollar.
India’s Growing IT Market Sector and Increased Technical Outsourcing Will Affect the Indian Rupee to US Dollar Rate
Eager to be part of the global workforce, Indian parents are pushing their children to study computer science rather than just focus on evergreen professions like medicine, law, accounting, and engineering. In addition, affluent parents are sending their children to foreign universities to get IT-based subjects. Once these graduates return to their native country, they will either join well-established corporate Indian IT service companies or launch their own startups.
Since the international demand for IT professionals far exceeds supply, India is planning to develop many higher-end digital consulting firms. This cultural proclivity for high-demand IT services is resulting in young people providing affluent Western countries with outsourcing technical services at a lower cost than if Western corporations were to hire locally. Exporting much-needed IT skills is another reason why the Indian rupee is likely to rise in value.
5 Frequently Asked Questions About the US Dollar to Indian Rupee
Now that we understand the many ways the Indian rupee can appreciate, let’s go over some frequently asked questions asked by investors interested in buying currency at a low price now to sell at a higher price later.
1. When was the Indian rupee started?
The Indian rupee has a long and illustrious history. It was believed to be started by Sher Shah Suri when he ruled from 1540 to 1545. However, India, along with China and Lydia, issued the world’s first coins in the 6th century B.C.
2. What is the Indian rupee symbol?
The Indian rupee symbol is INR while the United States dollar is USD, so when you are calculating the US Dollar to Indian Rupee conversion on a currency calculator look for a USD INR pair.
3. What is the history of the dollar vs Indian rupee?
When India got its Independence from the British government in 1947, US dollar to Indian rupee conversion rate was at parity because the Indian currency was pegged to the British pound. The exchange rate was 13 rupees to one pound until 1966, but then the rupee faced devaluation and became pegged to the USD. The rupees to dollar rate was one dollar to 7.5 rupees. At the time of this writing, the USD to INR rate is one United States Dollar is equal to 71.75 rupees
4. Where can I buy Indian rupees?
You can buy Indian rupees from us here at Treasury Vault. We sell 2,500 Indian rupees for less than $100. Incidentally, if you are looking for other undervalued currency like the Vietnamese Dong or the Iraqi Dinar, we sell these at excellent prices, too.
5. What is the value of the Indian rupee today?
Naturally, before buying Indian rupees, familiarize yourself with the USD to Indian rupee history so that you have a good USD to INR strategy. It’s a good idea to consult with a forex broker or learn how to trade the forex market yourself to decide how much you should buy and when you should buy it.
Will the Indian Rupee Strengthen?
When it comes to investment advice about investing in the Indian rupee, we should turn to Sir John Templeton. His immense success as a stock market investor was due to his unusual investment philosophy. Today, we classify him as a value investor. He was not one of those analysts who relied on market technical charts to decide if he should buy a company’s stock. Instead, he relied on pessimistic times to buy the stocks of valuable companies at bargain-basement prices. When the economy recovered, he owned a large number of valuable shares, reaping more than a billion from his shrewd forecast.
Similarly, if you look at the Indian rupee, you are likely to conclude that since the currency is depreciating, it may not a good idea to buy more rupees. But if you take a closer look at the global trade situation, you can see that all the factors decreasing the strength of the currency are actually a result of temporary forces. Oil prices will level out. Trade wars are not sustainable. Meanwhile, India has established a formidable industrial sector and a keen interest in ramping up its IT workforce. In other words, many strong factors that suggest that the current widening rupees to dollars imbalance will self-correct in the future.