New Delhi | 1st June 2025 — The Indian Rupee, once hailed for its resilience, has just wrapped up May 2025 as Asia’s worst-performing currency, closing the month at ₹85.57 against the US dollar. That’s a sharp turn from the upward momentum it showed earlier this year.
A Weakening Rupee — The Quick Stats
- May depreciation: ~1% drop vs. USD
- Current rate: ₹85.5775 per dollar
- Forex reserves (as of mid-May): $685.7 billion
- Still $19 billion below all-time high
While a 1% dip might not sound dramatic, in the world of currency markets, small changes mean big consequences, especially for a country as import-reliant as India.
What’s Behind the Slide?
1. RBI’s Dollar-Buying Backfires (Sort Of)
The Reserve Bank of India (RBI) has been actively buying dollars in recent weeks to replenish its foreign exchange reserves. While this is a strategic move in the long run, in the short term it keeps the rupee from gaining strength even when external conditions are favorable.
In simple terms? The RBI stepped in to protect us—but ended up weighing the rupee down.
2. The Dollar Roars Back
Thanks to a U.S. court ruling that paused certain tariff implementations, the American dollar surged, hitting Asian currencies hard. The rupee was no exception.
When the dollar strengthens, other currencies typically lose value—especially in markets like India that rely on foreign capital and global trade.
3. Geopolitical Uncertainty & Importer Demand
Add to that the usual cocktail of geopolitical worries, including recent border tensions and trade uncertainties, and the rupee’s balance tipped further into the red.
At the end of May, importers rushed to buy dollars to settle month-end bills. That spike in demand added pressure and pushed the currency down further.
4. Crude Oil Prices — The Usual Suspect
India is still heavily dependent on oil imports, and with global oil prices remaining volatile, any spike means we need more dollars to buy the same amount of oil. That’s bad news for the rupee every single time.
5. Capital Outflows: Investors Looking Elsewhere
Foreign investors have been quietly exiting Indian markets. In early 2025, nearly $99 billion fled Indian equities and bonds, spooked by slower-than-expected GDP growth (just 5.4% in Q3 2024) and a wait-and-watch approach to the upcoming Budget.
This outflow of dollars weakens the rupee further—demand goes up, supply dries out.
Expert Take: “Structural Issues Need Fixing”
Market analysts are calling this a “reality check” for India’s macroeconomic fundamentals. While inflation is somewhat under control and forex reserves are improving, the slowdown in growth, high import bills, and dependency on hot money (short-term foreign capital) continue to haunt the rupee.
Unless reforms deepen and India can attract long-term investment, the rupee might continue wobbling.
What Does This Mean for You?
- Imported goods (especially electronics, fuel, and foreign travel) might get more expensive.
- Foreign education and international remittances will cost more in rupees.
- Exporters might get a short-term boost, as a weaker rupee makes Indian goods cheaper abroad.
What’s Next?
The coming weeks will be crucial. The RBI will need to strike a careful balance between defending the rupee and maintaining reserves. Meanwhile, global markets are watching India closely, especially with the Budget announcement around the corner.
Will the rupee bounce back, or is this the start of a longer slide? Only time—and policy—will tell.
Stay tuned to Bharat Global Time
