The Indian foreign exchange market witnessed bouts of volatility even as the USD/INR exchange rate recorded sharp two-way movements during January-May 2025, according to RBI financial stability report. The pace of rupee depreciation accelerated in late 2024 and continued till February 2025. In March and April, however, it appreciated supported by the broad-based weakness of the USD and relatively better economic outlook for India vis-'-vis other economies, RBI noted. Different indicators, such as the real effective exchange rate (REER), the exchange market pressure (EMP) index, implied volatility derived from option prices, and offshore-onshore spreads, continue to underscore the stability of the exchange rate, the central bank noted.

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