Dollar To Rupee
May Mcgriff
You must express the amounts you report on your U.S. tax return in U.S. dollars. Therefore, you must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.
The only exception relates to some qualified business units (QBUs), which are generally allowed to use the currency of a foreign country. If you have a QBU with a functional currency that is not the U.S. dollar, make all income determinations in the QBU's functional currency, and where appropriate, translate such income or loss at the appropriate exchange rate.
Note: The exchange rates referenced on this page do not apply when making payments of U.S. taxes to the IRS. If the IRS receives U.S. tax payments in a foreign currency, the exchange rate used by the IRS to convert the foreign currency into U.S. dollars is based on the date the foreign currency is converted to U.S. dollars by the bank processing the payment, not the date the foreign currency payment is received by the IRS.
To convert from foreign currency to U.S. dollars, divide the foreign currency amount by the applicable yearly average exchange rate in the table below. To convert from U.S. dollars to foreign currency, multiply the U.S. dollar amount by the applicable yearly average exchange rate in the table below.
Exceptions:Exceptions to using the reporting rates as shown in the report are: collections and refunds to be valued at specified rates set by international agreements, conversions of one foreign currency into another, foreign currencies sold for dollars, and other types of transactions affecting dollar appropriations. See Volume I Treasury Financial Manual 2-3200 for further details.
To ensure all reports are translated at uniform exchange rates, all U.S. government agencies should use these rates, except as noted above, to convert foreign currency balances and reported transactions to U.S. dollar equivalents as of the date of this report and for the ensuing three months. Since the exchange rates in this report are not current rates of exchange, they should not be used to value transactions affecting dollar appropriations. For exchange rates for years before 2001, visit the gov.info website. This website has individual reports for years going back to 1963 and a consolidated report that goes back to 1956.
The dollar-rupee rate has shown a tendency to consolidate in a range for 6-12 months and then give a break out. Last year before the pandemic, it was consolidating between 69 and 71 broadly and as the pandemic broke out the pair also broke out and closed the financial year 2019-20 at 75.80.
As the pandemic cases rose the consequences of the pandemic also rose with the GDP in the first quarter of 2020-21 plummeting by 24 per cent. The rupee fell to a new all-time low of 76.91 on April 22, 2020 before the RBI supported it and started selling dollars to stabilise it. Meanwhile, the BSE Sensex had fallen to 25,000 levels and the NSE to 7,500 levels as the market gave a thought to the after-effects of the pandemic to the economy. At this juncture, Reliance started to sell stakes of Reliance Jio and Reliance Retail thus bringing in about $25 billion of FDI into the country.
The stock market started to rise as inflows from FPIs, FDI, corporate borrowing (due to low interest rates in the western economy), inflows from a string of IPOs and NRIs started to increase. The stock market levels nearly doubled in about nine months from the fall and Sensex crossed 50,000 and the Nifty, 15,000. The dollar was getting sold everywhere as Asian currencies rose with the CNY rising to 6.40 levels from seven against the dollar.
The rupee also rose based on the flows, but here the RBI was standing like a wall as it prevented any appreciation of the rupee beyond 72.25. The RBI bought nearly $121 billion from the market in a span of one year taking its forex reserves to a new high of $590 billion. The Sensex and Nifty started consolidating at these levels but individual stocks performed well especially in the chemical, IT and pharma industries as earnings growth was expected to be higher by about 15 per cent.
The earnings growth was above the estimates, but the PE rose to 38 against an average PE of 18-20. The inflows continued and allowed the dollar to touch a level of 72.25 thrice. Exporters rarely got a chance to sell at good levels as most of the time the inflows kept the rupee on an appreciated level.
As March 2021 approached, it was expected that the RBI would take the USD-INR higher (for paying higher dividend to the Central government), but till the expiry on March 26, 2021, the dollar was near to its low point and later on since the month, quarter and year were ending it was expected that selling would continue and keep the pair at its lowest.
However, the RBI proved everybody wrong and USD-INR closed the year near 73.10 after touching an intra-day high of 73.59. It was again proved that the RBI, backed by its immense foreign exchange resources, could ensure that it will always control the direction of the movement of rupee though it always says it controls the volatility.
Though the the lockdowns were not as severe as in March-May it was estimated that it would slow the growth and the earnings of companies. The dollar started to rise as Asian currencies also started to fall against the dollar. The dollar index rose to 93.50 from a low of 90. It however fell to 92, but the fall in the index did not have any effect on the Asian currencies and the rupee. The dollar 10-year yields also had more than doubled from a low of 0.80 to above 1.77 before falling to 1.60-1.70 levels.
Technically, once 75.20 is broken then we can see 76.90 in no time as 75.20 is 61.8 retracement of fall from 76.90 to 72.25. Further, beyond 76.90 the space is open for 80 levels. However, the RBI has accumulated the reserves for this eventuality and though they may not change the direction (as a weaker rupee is always an advantage to them) they will for sure keep a tab on the weakness of the rupee.
Importers should buy during the dips and ensure they are hedged for two months. They should ensure they have sufficient margin on the costing front. Importers should buy Calls (OTM) or a sea gull. Exporters should keep a strict stop-loss of 74.75 and should keep upping their stop loss at every rise of 50 paise. Instead, of a stop-loss they can also buy an OTM (out of the money) put and ensure that they get the gains of the fall in the rupee.
Purchasing power parities (PPPs) are the rates of currency conversion that try to equalise the purchasing power of different currencies, by eliminating the differences in price levels between countries. The basket of goods and services priced is a sample of all those that are part of final expenditures: final consumption of households and government, fixed capital formation, and net exports. This indicator is measured in terms of national currency per US dollar.
This is a list of tables showing the historical timeline of the exchange rate for the Indian rupee (INR) against the special drawing rights unit (SDR), United States dollar (USD), pound sterling (GBP), Deutsche mark (DM), euro (EUR) and Japanese yen (JPY).
According to Business Today, a past RBI study has shown that a 5% depreciation in the rupee could push inflation higher by roughly 20 basis points and vice versa. Added to that, a depreciating rupee can dampen foreign institutional investor (FII) sentiment and lead to FII outflows.
For instance, the RBI offers to sell $100 million at the cost of Rs 80 per dollar. And then seeing the interest of the currency market, it announces that it will sell off $200 million more, hence, the buyers get an opportunity to buy more US dollars at a time when demand for it is very high.
However, by doing so, the rupee in the currency market gets reduced by Rs 8,000 million, so there is less rupee left in the market. And lower supply of the rupee causes the value of the rupee to rise or it gets costlier.
India and Bangladesh may soon do away with dollar as the currency of exchange between the two South Asian neighbours. The development is expected to reduce the cost of trade as well as losses due to Rupee-Dollar and Taka-Dollar differences.
"The pressure on reserves has come down a lot. The import bills have come down because of the measures taken. It is now possible to meet the import bills with the export proceeds and remittance inflows. But there are other dollar outflows that need to come down."
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