Apart from a dip as Covid emerged in 2020, the value of an Indian rupee (INR) in Australian dollars (AUD) has been relatively stable in recent years—with $1 AUD being exchanged for between ₹50-58. At the time of writing the AUD/INR exchange rate was around ₹54 rupees.
Whether the rupee will appreciate against the Australian dollar in 2024 depends heavily on how economic powerhouses—the US and China—navigate their current fiscal challenges, according to forex expert Tim Waterer, Chief Market Analyst at KCM Trade.
Related: AUD to USD: Will the Aussie Dollar Rise?
The AUD Outlook in 2024
The Aussie’s value slipped towards the end of 2023, largely driven by subdued global economic activity and resilient demand for the US dollar. Given the higher interest rates in the US and its ‘safe haven’ status, many investors favoured the Greenback.
Investor concerns about Australia’s largest export market haven’t helped the AUD. China’s slowing growth, distressed property sector and weak consumer confidence signals less demand for Australian commodities (and therefore, Australian dollars).
In January this year, the AUD depreciated 4% against the USD. However, many Australian economists are still predicting the AUD/USD to appreciate in 2024: Westpac and ANZ are both calling 70c by December and NAB’s forecast is 73c by year-end.
Speculation of a March rate cut by the US Federal Reserve now seems premature, yet it’s clear that a cutting cycle is imminent. Australia’s central bank, on the other hand, is expected to hold rates steady until late 2024—putting the differential on a more even keel.
Analyst Tim Waterer said a loosening of monetary policy in the US would see the USD lose some of its yield advantage against other currencies, including the Aussie.
“I do think we could see the USD depreciate at the commencement of the rate cutting phase by the Fed, however the decline could be shallow,” he tells Forbes Advisor.
“That is because rate cuts from the Fed could trigger similar action from other central banks around the globe in the following months.”
The success of other economies’ disinflationary measures will come into play and impact currencies.
“In terms of the impact of Fed cuts on the AUD/INR rate, it could well come down to whether it will be the RBA or the (Reserve Bank of India) which jumps first to reduce interest rates,” Waterer says.
“Whichever country is most successful in bringing inflation closer to the target level will probably see the currency value unwind in anticipation of rate cuts.”
INR Performance and Drivers
Waterer said India’s economic trajectory had attracted foreign investors in 2023, meaning the rupee fared better against the USD than other currencies.
“China’s ongoing economic woes over the past year has seen foreign investors looking elsewhere for greener pastures, and India has been at the top of that list,” he says.
“If we take a look at the performance of the AUD/INR rate since the beginning of 2023, I think it is fair to say that China’s lacklustre economic performance in that time has contributed to the Aussie Dollar’s slide against its Indian counterpart.”
He said foreign investment in Indian Government bonds reached a six-year high in 2023, with the relatively high rate of return on offer keeping the rupee in demand.
Waterer expects this demand to continue, adding: “India is front and centre on the world stage right now when it comes to attracting foreign investment. The GDP growth potential of the Indian market has attracted growing corporate interest and in turn investment.”
Unknown quantities for India in 2024 include its ability to meet forecast growth levels of between 6.5% to 7% and maintain political stability in the face of national elections slated for April and May. ANZ analysts expect the country’s GDP growth to fall to 6.2%, with a shallow rate-cutting cycle starting towards the end of 2024.
AUD to INR Forecast for 2024
No dramatic shifts are expected when it comes to the trending AUD/INR conversion rate. The forecast from TradingEconomics is for one Australian dollar to be priced at ₹53.7 by the end of March 2024, with a slight decline towards the year’s end. Various other analyses anticipate little change over the year, with forecast conversion rates of between 52-to-55 rupees.
Events in the US and China—and how these influence domestic policies in both Australia and India—will interest investors. Hotter-than-expected US inflation data released in February 2024, which triggered revised expectations for the timing of the Fed’s rate cut, saw little change to the USD/INR rate, whereas the USD/AUD dropped by over 1% to below $US0.65.
China’s growth, or lack thereof, is a wildcard according to Tim Waterer.
“If China’s growth remains subdued in the next 12 months, this would likely hinder the AUD more than the INR, in which case there is scope for further upside in the rupee against the Aussie Dollar,” he says.
“The growth potential of the Indian economy probably bodes well for further gains for the rupee versus the AUD from a currency demand point of view, which could see the AUD slide further against its Indian counterpart.”
Australian Dollar to Indian Rupee Long-Term Forecast
Waterer notes that if Indian GDP can stay above the 6% level in coming years “this should keep the rupee in demand for foreign investors which could see further upside to the AUD/INR rate”.
He argues that the Australian economy, and by extension the AUD, has more to lose from ongoing sluggishness in the world’s second-largest economy—China.
“While India is also affected by China’s downturn, the country is well placed as an investment alternative to China and as such, any downside stemming from China’s slowdown is more limited in nature.”
