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Informist, Tuesday, Apr. 22, 2025

--RBI: Rupee effective FX rate index 101.49 in Mar vs 102.51 in Feb 

--CONTEXT: Real FX rate index for trade-weighted, 40-currency basket 

NEW DELHI – The rupee's real effective exchange rate against a basket of 40 currencies, in terms of trade-based weights, fell to a 22-month low of 101.49 in March from 102.51 the previous month, according to data released by the Reserve Bank of India on Tuesday.

The rupee appreciated 2.3% against the dollar in March, owing to weakness in the dollar index and foreign portfolio inflows into Indian markets. However, the Indian currency's real effective exchange rate fell last month as other currencies appreciated more sharply against the greenback. 

The dollar index, which measures the strength of the dollar against a basket of six major currencies, declined over 3% in March after a slew of softer-than-expected economic data in the US fuelled worries of a recession in the world's largest economy.  

"In terms of the 40-currency real effective exchange rate, the INR (Indian rupee) also experienced stress during H2:2024-25 (Apr-Sept), depreciating by 1.9% between September 2024 (average) and Mar. 28, 2025," according to a paper by central bank staff on the State of the Economy in the RBI monthly bulletin. "The depreciation of 40-currency REER in recent months also reflected the narrowing of India's inflation differential relative to its major trading partners. From a cross-country perspective, the depreciation of INR's 40-currency REER remained modest relative to REER of some major economies." 

The 40-currency basket includes the currencies of Angola, Australia, Bangladesh, Brazil, Canada, Chile, China, Egypt, the European Union, Ghana, Hong Kong, Indonesia, Iran, Iraq, Israel, Japan, Kenya, Kuwait, Malaysia, Mexico, Nepal, Nigeria, Oman, Qatar, Russia, South Korea, Saudi Arabia, Singapore, South Africa, Sri Lanka, Switzerland, Taiwan, Tanzania, Thailand, Turkey, Ukraine, the United Arab Emirates, the UK, the US, and Vietnam.  End

Reported by Pratiksha

Edited by Avishek Dutta

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