FX.co ★ Indian Rupee Weakens Further

In May, the Indian rupee declined to 86 per USD, marking a 1.5% depreciation for the month, despite the overall weakness of the US dollar and dovish speculation regarding the Reserve Bank of India (RBI). Recent data revealed a significant drop in consumer inflation in India, reaching a near six-year low in April, reinforcing expectations that the RBI might continue its cycle of rate cuts. Previously, the central bank had implemented successive reductions in its benchmark repo rate, which had remained at a four-year high of 6.5% for a year, in efforts to stem the domestic growth slowdown. Additionally, the RBI initiated multiple liquidity infusions into commercial banks following its measures to stabilize the rupee, which had depleted domestic reserves and tightened financial conditions.