This paper investigates the complex relationship amongst key macroeconomic indicators and the INR-USD exchange rate, set against the backdrop of the evolving global financial markets and the Indian economy's recent developments. Employing advanced econometric models and techniques, the study conducts an updated analysis incorporating data from 1991 to 2023. The study applied Augmented Dickey Fuller (ADF) test to check for stationarity of the variables. Multiple regression, correlation and ARIMA models are used to investigate how inflation rates, GDP growth, interest rates, and foreign direct investment impact the exchange rate behaviour. Diagnostic testing including heteroscedasticity, autocorrelation, and normality of the residuals is done to authenticate the regression results. The paper bridges theoretical economic models and real-world currency exchange phenomena, offering insights into forex market mechanisms and providing practical implications for policymakers, investors, and economic scholars. Through this comprehensive approach, the research aims to contribute significantly to the insights of exchange rate dynamics, particularly in the context of a developing nation like India.

KEYWORDS: Exchange Rate, Foreign Direct Investment, Inflation, Stationary, Regression, Correlation.

JEL Classification: E 41, F 31