Mumbai (Economy India): The Indian rupee slipped past the psychologically crucial 91-per-dollar mark on Tuesday, touching an all-time low of 91.03, as sustained foreign fund outflows, rising global trade tensions, and a strengthening US dollar continued to exert heavy pressure on the domestic currency.
According to data released by the Reserve Bank of India (RBI), the rupee closed at its weakest-ever level against the US dollar, marking a sharp deterioration in currency sentiment within just a few weeks of the new year. The fall underscores mounting concerns over global risk aversion, driven largely by renewed tariff threats from US President Donald Trump and escalating geopolitical uncertainties.
Sharp Decline Since Start of 2026
The rupee has remained under sustained pressure since the beginning of 2026. In December 2025, the currency had breached the 90-per-dollar level for the first time. In less than 20 days into the new year, it has now crossed 91, highlighting the pace and intensity of capital outflows and dollar demand.
Market participants note that the weakening trend reflects not just domestic factors but a broader global shift toward safe-haven assets such as the US dollar and gold.
Three Major Reasons Behind the Rupee’s Fall
1. Heavy Foreign Portfolio Investor (FPI) Outflows
Foreign investors have been aggressively pulling money out of Indian equity markets.
- In the first 20 days of January 2026 alone, FPIs have sold Indian equities worth ₹29,315 crore.
- As FPIs repatriate funds, they convert rupees into dollars, sharply increasing dollar demand and weakening the domestic currency.
Analysts say persistent selling pressure has eroded near-term confidence in emerging market currencies, including the rupee.
2. Trump’s Tariff Policies and Rising Global Tensions
Fresh tariff threats by US President Donald Trump against European economies, combined with ongoing geopolitical flashpoints — including the Greenland dispute — have created a risk-off environment across global markets.
During periods of uncertainty:
- Investors tend to exit emerging markets
- Capital flows into safe-haven assets like the US dollar and gold
This shift has significantly boosted the dollar index, putting additional pressure on the rupee and other Asian currencies.
3. Strong US Economy and Elevated Interest Rates
The US economy continues to show resilience, supported by:
- Lower unemployment levels
- Strong consumption indicators
This has reinforced expectations that US interest rates will remain higher for longer, attracting global capital into US bonds and financial assets. Higher yields in the US make dollar-denominated investments more attractive, further strengthening the greenback at the expense of emerging market currencies.
Markets Await Key US Supreme Court Ruling
Investor attention is now firmly focused on a key US Supreme Court ruling scheduled for January 20, which will decide on the legal validity of Trump’s tariff measures.
- A ruling in favour of Trump could intensify global trade tensions, leading to further pressure on emerging market currencies.
- A ruling against the tariffs may provide temporary relief to global markets, including the rupee.
Currency traders say the verdict could act as a near-term trigger for sharp moves in forex markets.
Rupee Could Slide Towards 92
Market experts warn that the rupee may weaken further if current conditions persist.
Amit Pabari, Managing Director of CR Forex Advisors, said that:
“If the rupee decisively breaches the 91.07 level, it could quickly move towards the 91.70–92.00 range.”
However, he added that the RBI is actively intervening in the forex market to curb excessive volatility. The central bank is believed to be selling dollars intermittently to prevent disorderly movements.
For now, the 90.30–90.50 range is seen as a strong support zone for the rupee.
Impact: Imports, Travel and Education to Get Costlier
A weaker rupee has direct consequences for the Indian economy and households.
- Imports become more expensive, especially crude oil, electronics, and machinery
- Overseas travel and education costs rise sharply
For instance, when the rupee was at ₹50 per dollar, Indian students needed ₹50 for every dollar of expenses abroad. At current levels, the same dollar now costs ₹91, significantly increasing tuition fees, accommodation costs, and daily living expenses.
How Currency Depreciation Works
A decline in the value of a currency against the dollar is known as currency depreciation.
Currency values are influenced by:
- Demand and supply of foreign exchange
- Capital inflows and outflows
- Foreign exchange reserves
India maintains foreign exchange reserves to manage external transactions.
- If dollar reserves fall, the rupee weakens
- If reserves rise, the rupee stabilises or strengthens
Sustained FPI outflows and rising global dollar demand have currently tilted the balance against the rupee.
Volatility Likely to Persist
With global trade tensions, strong US macroeconomic data, and continued foreign investor caution, experts believe rupee volatility is likely to persist in the near term. Much will depend on global risk sentiment, RBI intervention, and policy signals from the US.
For now, the breach of 91 per dollar marks a significant milestone — and a warning — for policymakers, businesses, and investors alike.
(Economy India)
