New Delhi ( Economy India): The Indian rupee has weakened sharply, slipping close to the 92 mark against the US dollar, as sustained foreign investor outflows and rising global trade and geopolitical tensions continue to weigh heavily on emerging market currencies.
According to PTI, the rupee touched a record intraday low of 91.99 per dollar, marking one of its steepest depreciations in recent years. Currency markets indicate that the rupee has been under sustained pressure since the beginning of calendar year 2026, following a turbulent end to 2025.
In December 2025, the rupee breached the psychologically significant 90-per-dollar level for the first time. In less than three weeks, it has now crossed the 91 level, raising concerns over capital flows, import costs, and inflationary pressures.
Foreign Portfolio Investors Continue Heavy Selling
One of the primary reasons behind the rupee’s sharp fall is the aggressive and persistent selling by Foreign Portfolio Investors (FPIs) in Indian equity markets.
Market data shows that FPIs have sold shares worth nearly ₹36,500 crore in the first 22 days of January 2026 alone. When foreign investors exit Indian markets, they convert their rupee holdings into dollars, significantly increasing demand for the US currency.
This surge in dollar demand pushes up the dollar’s value while simultaneously weakening the rupee.
Currency dealers note that the current pace of FPI outflows is among the highest for a January period in recent years, reflecting heightened global risk aversion.
Global Trade Tensions and Trump’s Tariff Signals Add Pressure
The second major factor impacting the rupee is the renewed escalation in global geopolitical and trade tensions, particularly involving the United States and Europe.
Statements and policy signals from US President Donald Trump, including tougher trade rhetoric toward European economies and the controversial Greenland dispute, have unsettled global financial markets. Such developments typically trigger a “risk-off” environment, prompting investors to exit emerging markets like India.
In times of global uncertainty, capital tends to flow toward safe-haven assets such as:
- The US dollar
- US Treasury bonds
- Gold
This global shift has further strengthened the dollar index, indirectly pressuring the rupee.
Strong US Economy and Higher Interest Rates Fuel Dollar Strength
Another critical driver of the rupee’s weakness is the resilience of the US economy.
Recent US macroeconomic indicators show:
- Falling unemployment rates
- Strong consumer spending
- Robust economic growth
These factors have reinforced expectations that the US Federal Reserve will keep interest rates elevated for longer.
Higher US interest rates make American bonds and bank deposits more attractive to global investors, leading to increased capital inflows into the US. As money moves into dollar-denominated assets, the greenback strengthens worldwide—putting downward pressure on currencies like the Indian rupee.
Experts See Key Resistance Near 92 Level
Currency market experts believe the 92-per-dollar level could act as a strong technical resistance for the rupee in the near term.
Amit Pabari, Managing Director of CR Forex Advisors, said that while the rupee is under pressure, further depreciation may not be linear.
“The 92.00 level is a major resistance zone. If global tensions ease and capital outflows slow, the rupee could recover toward the 90.50–90.70 range,” Pabari said.
However, he cautioned that sustained recovery would depend on:
- Stability in global markets
- Reduced geopolitical risks
- Improvement in foreign capital inflows
Impact of Rupee Depreciation: Imports, Travel, and Education Costlier
A weaker rupee has direct economic consequences for India.
Since India is a net importer, especially of crude oil, electronics, and capital goods, rupee depreciation makes imports more expensive. This, in turn, can:
- Widen the trade deficit
- Increase input costs for businesses
- Put upward pressure on inflation
The impact is also felt by individuals. Overseas travel, foreign education, and international medical expenses become significantly costlier.
For example, when the exchange rate was ₹50 per dollar, Indian students studying in the US needed ₹50 to buy $1. Today, they must spend over ₹91 for the same dollar, sharply increasing expenses related to tuition, accommodation, food, and insurance.
How Currency Valuation Works
When a currency loses value against another currency, it is referred to as currency depreciation.
Currency values are primarily determined by:
- Demand and supply in forex markets
- Capital inflows and outflows
- Trade balance
- Interest rate differentials
- Foreign exchange reserves
Every country maintains foreign exchange reserves—a stockpile of foreign currencies, gold, and other assets used to manage international transactions and stabilize the domestic currency.
If a country’s forex reserves decline or fail to keep pace with rising dollar demand, its currency weakens. Conversely, rising reserves help support currency stability.
RBI’s Role and Market Expectations
Market participants are closely watching the Reserve Bank of India (RBI), which may step in to smooth excessive volatility through dollar sales or liquidity measures.
While the RBI typically avoids defending a specific exchange rate, it intervenes to prevent sharp and disorderly movements that could destabilize the economy.
Analysts believe that sustained rupee stability will depend on:
- Global risk sentiment
- US interest rate trajectory
- India’s growth outlook
- Policy actions by the RBI
The rupee’s slide toward 92 per dollar reflects a complex mix of global uncertainty, foreign capital outflows, and a strengthening US dollar. While short-term volatility may persist, experts believe the currency could stabilize if global tensions ease and investor confidence returns.
For now, the rupee remains caught in the crosscurrents of global macroeconomic forces—underscoring the deep interconnection between India’s financial markets and the global economy.
(Economy India)
