USD to INR Analysis & Commentary

Updated on 17 March 2025

The exchange rate of USD to INR during February 2025 was extremely volatile and the overall trend for the month was positive for USD and not INR.

The average rate for February was around ₹86.74 with a high of ₹88.05 and a low of ₹85.59.

The month started at the USD to INR rate at ₹85.59 as of 1st February, 2025

Throughout the month, the exchange rate kept increasing, reaching ₹88.05 on February 10, 2025. This was a significant appreciation of the USD against the INR.

Towards the end of the month, there was a slight moderation, with the rate closing at ₹87.33 on February 28, 2025, still considerably higher than the month's opening rate.

The global economic factors played a crucial role in shaping the USD to INR rate. The world economy was stable with a projected growth rate of 2.8% for 2025, consistent with the previous year. This contributed to the overall strength of strong currencies like the USD.

Strong US economic indicators significantly improved the USD's position against the INR. The US economy began the year 2025 well, with 2.3% GDP growth during the fourth quarter of 2024 and 2.2% growth expected in 2025 on a Q4/Q4 basis.

The Survey of Professional Forecasters predicted 2.5% growth for Q1 2025. This economic resilience made the USD a better investment choice, leading to its appreciation against the INR.

US inflation continued to be an issue. Consumer Price Index (CPI) was predicted to rise to 2.8% on a Q4/Q4 basis in 2025, whereas core CPI was predicted at 2.9%.

The persistent inflationary pressure triggered expectations for the Federal Reserve to stay cautious, cutting rates only once in 2025, probably in September. 

February 2025 saw huge outflows from India's equity markets. Foreign Portfolio Investors (FPIs) pulled out a whopping ₹34,574 crore from Indian equities in February.

The massive outflow of foreign investment created an additional pressure on the INR and caused it to depreciate against USD.

Interestingly, crude oil prices experienced a decline in February 2025, with the average monthly price down by 5.6% to $73.82 per barrel.

While lower oil prices tend to benefit the INR since it would reduce the import bill, other factors outweighed this possible benefit, and thus the INR weakened against the USD overall.

February, also being close to the end of the Indian financial year (March 31), usually sees more demand for USD from Indian corporates for settling international accounts and financial obligations. Such demand seasonally also contributes towards the volatility of USD to INR rate.

Source:

UN

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