May 26, 2025
New Delhi, India
USDINR
The Indian Rupee (INR) edged higher in early European trade on Monday, extending gains after its strongest single-day performance in over two years. According to Bloomberg, the INR appreciated by nearly 99 paise in the previous session — its best since November 11, 2022.
The surge was fueled by growing concerns over the United States’ fiscal health and a broad-based decline in the US Dollar, particularly due to selling pressure from foreign banks. These factors have improved sentiment for the Indian currency in the short term.
RBI Rate Cut Outlook, Oil Prices May Weigh on INR
Despite the current momentum, analysts caution that the upside for the INR may be capped. Expectations that the Reserve Bank of India (RBI) may lower interest rates in the coming quarters, coupled with rising crude oil prices, pose downside risks. As the world’s third-largest oil consumer, India’s currency tends to weaken with increasing oil import costs.
Global Developments to Watch
The foreign exchange market is also reacting to comments and policy signals from US Federal Reserve officials:
Chicago Fed President Austan Goolsbee flagged complications in monetary policy due to recent trade threats.
Kansas City Fed’s Jeffrey Schmid emphasized reliance on hard data rather than sentiment-driven soft indicators.
Markets are now pricing in two Fed rate cuts in 2025, with the first expected in September.
Meanwhile, geopolitical developments added a fresh twist. US President Donald Trump announced a pause on tariffs targeting the European Union, extending the deadline to July 9, which also helped risk sentiment globally.
Adding to the upbeat backdrop for India, the country has overtaken Japan as the world’s fourth-largest economy, as per the latest IMF data — a milestone that bolsters long-term investor confidence in the Indian market.
Looking Ahead
Investors will closely watch the FOMC meeting minutes due Wednesday, and the US PCE Price Index report, which may provide further cues on inflation and Fed policy direction.
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