Why is CAD to INR exchange rate up today on 4th july 2022(1st half of July 2022)?
Over the last five years, the CAD to INR exchange rate has steadily increased. As of Jul 18, 2022, 1 Canadian dollar equals 61.93 Indian rupees. The value peaked on Jul 18, 2022, at 61.93. Nevertheless, Jul 11, 2022, featured a nadir of 60.31. On average, the Canadian dollar has equaled 60.94 Indian rupees. From the graph below, we can infer that the trend curve has been volatile, with a standard deviation of 0.198 rupees in the past two weeks (4th of July, 2022 to Jul 18, 2022). The currency is expected to have a value above 60 rupees. What used to be 50 to 55 rupees has crossed the 60 mark. This could be because of rising fuel prices, a strong dollar, and a trade and foreign capital deficit.
Several factors affect the CAD to INR exchange rates:
1. Crude Oil
India has one of the largest populations on earth. India imports more than 80% of the demand from other countries to meet the demand for crude oil. The world’s economy has been highly volatile. This has been the case in the crude oil price as well. On Jul 05, 2022, the price hit a high of $111.45. The trend line suggests that the prices have been decreasing and increasing haphazardly. On Jul 14, 2022, the prices hit a low of $90.56. This may be a positive sign, but the volatility suggests otherwise.
A decrease in the cost could suggest that the production, transportation, and manufacturing of goods can be more straightforward and inexpensive. This might lead to a decline in inflation, which could increase the value of the Indian currency. However, that has not been the case. Several other factors prevent the rupee from performing better.
Canada is also highly dependent on crude oil. Usually, their crude oil export is more significant than their crude oil import. However, their import numbers have been growing significantly in 2022. In May 2022, they imported crude oil worth 1754M Canadian dollars. This number is considerably higher than their historical import, usually less than $1000M — $1500M (CAD).
2. Commodity Prices and Import/Export
Canada and India import commodities like metal ores and minerals, refined petroleum products, plastic and rubber products, chemicals, energy products, etc. Since the overall import-export deficit affects the currency’s performance against the US dollar, the commodities mentioned above play a significant role in the CAD-INR exchange rate.
Inflation affects commodity prices. From the table above, it can be seen that the commodities’ prices have increased from 171.7 base points in May 2022 to 172.6 base points in June 2022. This trade deficit justifies and validates the poor performance of the Indian currency against both USD and CAD.
3. Interest rates
Canada expects the inflation rates to grow further. They also believe that the cost of restoring economic stability will be higher. They expect global economic growth to decrease from 3.5% in 2022 to 2% in 2023 before it strengthens to 3% in 2024. The bank of Canada has taken restorative measures to ease the impact of the struggling economy on the people.
The Reserve bank of India has also taken a similar measure. The RBI has increased the interest rate by 50 basis points. The interest rates have risen from 4.4% in May 2022 to 4.9% in June 2022. However, economists expect the interest rates to grow further by December 2022. India aims to curb the inflation rate from 6% to less than 3% by 2024.
4. Inflation
The inflation rate gives insight into the currency’s performance and value. The higher the inflation, the lower the value of the money. Inflation has been a problem in almost every country today. While some countries are adversely affected by it, some can tolerate the ill effects of inflation.
The inflation rates have been increasing since September 2021 in India. The growth appeared to slow down at the beginning of 2022; however, inflation rates grew significantly in March, April, and May. However, the rates decreased to 7.01% in June 2022.
5. Unemployment rate and Job Availability
Employment rates and job availability affect the currency indirectly. An increase in employment rates and job availability suggests that the economy is stabilizing. In Canada, the unemployment rate has decreased from 5.1% in May 2022 to 4.9% in June 2022. This indicates that more people are finding jobs. Canada’s new job openings are helping to increase the employment rate.
However, in India, the unemployment rate has increased from 7.12% in May 2022 to 7.8% in June 2022. However, there was a significant decrease in unemployment in July 2022, as the unemployment rate came down to 6.8%. This uncertainty and volatility have reduced the buying power of the people, thereby reducing domestic investments in the country.
6. Budget deficit and national debt levels
Almost every country has debt. While these debts are manageable, higher debt levels lead to inflation, which devalues the currency. Similarly, a country presents its budget for the forthcoming financial year when the actual expenditure exceeds the budget, and inflation increases, subverting the money.
On the other hand, India releases its union budget in February every year. In the first quarter of 2022, India spent USD 13.4B more than the budget. And India’s external debt stands at USD 620B at the end of the first quarter of 2022.
7. Politics and international policies
A government’s stability also impacts the country’s currency — higher uprisings and protests against the government, lower foreign investments, and lower currency value. Recently, the Indian government has faced severe backlash from its citizens for many reasons, including religion, tax, political party instability, etc. This has led to the prosperity of only a few parts of the nation. This biased development has also led to the depreciation of the Indian currency.
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