June 2, 2025
New Delhi, India
USDINR Today
The Indian Rupee extended losses during Monday’s Asian session, weighed down by rising crude oil prices and growing market expectations of a third consecutive 25 basis points rate cut by the Reserve Bank of India (RBI). Despite a stronger-than-expected economic growth print, the INR remains under pressure.
India, the world’s third-largest oil importer, faces higher import bills when crude prices climb, leading to a weaker currency. This trend was visible as the INR fell even after the release of Q1 GDP data, which showed India’s economy expanding by 7.4% year-on-year, significantly above the previous quarter’s 6.2% and the estimated 6.7%.
RBI Policy Expectations Cloud Outlook
The possibility of an RBI rate cut later this week continues to cap upside potential for the rupee. Analysts suggest that the central bank may focus on supporting growth amid subdued foreign investment and inflation moderation. Traders are also closely watching the US ISM Manufacturing PMI data due later today, along with Friday’s RBI rate decision and US Nonfarm Payrolls data for further direction.
India’s Foreign Investment and Reserves Under Pressure
While GDP data was encouraging, foreign inflows remain sluggish. Net Foreign Direct Investment (FDI) fell to $0.35 billion in FY24-25, the lowest in two decades, as repatriations by Indian firms offset inflows. At the same time, the Rupee has emerged as Asia’s worst-performing currency this quarter, partly due to RBI’s efforts to avoid excessive depletion of foreign exchange reserves, which stood at $693 billion as of May 23, down from $705 billion in September 2024.
US Tariffs and Trade Talks Add to Uncertainty
Meanwhile, traders are also eyeing the outcome of ongoing US-India trade negotiations, with a resolution expected by fall. The temporary 90-day tariff pause, which ends on July 9, adds another layer of uncertainty. Earlier in April, the US had reimposed tariffs of up to 27% on Indian goods.
Global Inflation in Focus
In the US, the PCE Price Index—the Federal Reserve’s preferred inflation gauge—eased to 2.1% YoY in April from 2.3% in March, slightly below market expectations. This could influence Fed policy and affect dollar strength, thereby impacting the rupee’s trajectory.
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