Full Breakdown
Indian Rupee Faces Pressure as It Slips Past 90 per Dollar
1/2/2026, 8:54:36 PM
Recent Performance and Market Dynamics
The Indian rupee (INR) has recently experienced significant depreciation, closing at 90.20 per US dollar on January 2, 2026, marking a continued decline as it slipped past the critical 90-per-dollar threshold. This decline follows a broader trend of weakening, with the rupee falling 0.4% over the past week and 0.65% the previous week. The depreciation is attributed to persistent dollar demand, particularly from oil importers, and ongoing foreign portfolio investor (FPI) outflows from Indian equities.
Traders noted that the rupee opened slightly firmer at 89.93 but failed to maintain its strength, ultimately closing 0.3% weaker. The thin liquidity during the holiday season has exacerbated the currency's volatility, with market participants closely monitoring the Reserve Bank of India's (RBI) interventions to stabilize the rupee.
Factors Influencing the Rupee's Decline
Several factors are contributing to the rupee's current trajectory. The demand for US dollars remains robust, driven by corporate needs and the high import bill, particularly for gold and oil. Analysts have pointed out that the RBI's efforts to defend the 90 level are crucial, as the central bank has been actively selling dollars to mitigate sharp depreciation. Despite these interventions, the rupee's outlook remains uncertain, with expectations of continued pressure due to foreign capital outflows.
In December 2025, foreign institutional investors sold equities worth INR24,148.33 crore, contributing to the rupee's decline. The absence of a trade agreement with the United States has also created uncertainty, further complicating the currency's stability.
Economic Outlook and Future Projections
Looking ahead, economists suggest that the rupee could stabilize within a range of 90 to 91 per dollar in the near term, contingent on external factors and RBI interventions. Some forecasts indicate that if trade uncertainties persist, the rupee may drift towards 92–93 by March 2026. Conversely, a successful trade deal could bolster the rupee's position, potentially stabilizing it in the 88–89 range.
Despite the current challenges, some analysts express optimism regarding India's macroeconomic fundamentals, including strong foreign exchange reserves and resilient services exports, which could provide a buffer against further volatility.
Official Statements & Responses
Kunal Sodhani, head of treasury at Shinhan Bank India, emphasized the importance of the RBI's response to currency movements, stating, "Markets will watch closely for signals on how tolerant the RBI remains of the currency moves." Meanwhile, Namrata Mittal, Chief Economist at SBI Mutual Fund, noted that the rupee's recent weakness could enhance the competitiveness of India's real effective exchange rate (REER), suggesting a potential improvement in the balance of payments in FY27.
Criticism & Opposition
Critics argue that the RBI's interventions may not be sufficient to counteract the underlying pressures on the rupee. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, highlighted the need for sustained foreign buying to support the rupee, stating, "A sustained return of foreign buying would be supportive for the rupee in the coming year."
Verbatim Quotes
- “Markets will watch closely for signals on how tolerant the RBI remains of the currency moves, scale and timing of its interventions, and the use of instruments such as FX swaps and liquidity operations,” — Kunal Sodhani, Head of Treasury, Shinhan Bank India
- “Overall, currency fundamentals remain stable, aided by contained CAD, resilient services exports, and hope of improving capital flows.” — Namrata Mittal, Chief Economist, SBI Mutual Fund
- “FPIs flow into Indian equities, a sustained return of foreign buying would be supportive for the rupee in the coming year, which has been the worst-performing currency in the emerging market and Asian markets,” — Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors LLP
As the Indian rupee navigates these turbulent waters, market participants will be closely monitoring both domestic and international developments that could influence its trajectory in the coming months.
