Taking historical data into account, it is seen that the INR is usually one of the weakest performing currencies in May and expectations this time are for the weakness to continue for a while. The currency’s close correlation with the equity market means it is vulnerable to signs of domestic slowdown and any reassessment of US Fed rate hikes.

Historical studies have shown that the INR depreciates with consistent regularity during the month of May. We tend to see a peak in gold import volumes occurring in April and May on account of highest number of auspicious wedding dates falling within that period.

An unusual absence of auspicious wedding dates in May this year may not be sufficient to prevent INR weakness from repeating. Since 2000, INR has weakened in 12 out of the last 16 years, which means historically there has been a 75% chance of it depreciating during May.

“With the currency on the rich side, INR’s diminishing positive reaction to rate cuts and slow reform progress also pose risks to the currency, in our view. We maintain our year-end USD/INR forecast of 68.5.” said ANZ in a report.