The Indian rupee experienced significant volatility on Friday, plummeting to an unprecedented all-time low of 92 against the US dollar during intraday trading before making a marginal recovery to settle at 91.88 on a provisional basis. This sharp decline was primarily driven by sustained selling pressure from foreign institutional investors, lackluster performance in domestic equity markets, and a prevailing risk-off sentiment across global financial markets.
Intraday Volatility and Key Factors
At the interbank foreign exchange market, the domestic currency commenced trading at 91.45 against the greenback and initially showed strength by reaching an intraday high of 91.41. However, this upward momentum proved short-lived as intensified selling activity reversed the gains, pushing the rupee to a record intraday low of 92.00. The currency ultimately closed the session at 91.88, marking a decline of 30 paise from its previous closing level.
Forex market analysts attributed this dramatic intraday reversal to multiple converging factors. Persistent outflows from foreign institutional investors created substantial selling pressure, while simultaneous weakness in domestic equity indices further eroded investor confidence. The global financial landscape remained clouded by uncertainty, contributing to a risk-averse environment that typically disadvantages emerging market currencies like the rupee.
Additional Pressure Points
Beyond these primary drivers, two additional macroeconomic factors exerted downward pressure on the Indian currency. Rising crude oil prices increased India's import bill, while elevated US treasury yields enhanced the attractiveness of dollar-denominated assets, drawing capital away from emerging markets.
Recent Performance and Historical Context
This development follows Thursday's trading session where the rupee had demonstrated resilience by rebounding from record low levels to close 7 paise higher at 91.58 against the US dollar. The previous all-time closing low was recorded on January 21, when the currency plunged 68 paise to settle at 91.65.
The rupee's depreciation has accelerated significantly in recent weeks. So far this month alone, the domestic currency has weakened by nearly 200 paise, representing a depreciation of over 2%. Looking at the broader calendar year 2025, the rupee has already depreciated by approximately 5%, reflecting sustained dollar strength and unabated foreign fund outflows from Indian markets.
Analyst Perspectives and Forecast
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, provided insights into the currency's trajectory. "We expect the rupee to trade with a negative bias due to selling pressure from FIIs and risk-off sentiments in the global markets. Dollar demand from hedgers and imports may further pressurise the rupee," he stated.
Choudhary added that potential support could emerge from two sources: a weaker US dollar in global markets or intervention by the Reserve Bank of India. He projected the USD-INR spot rate to trade within a range of 91.60 to 92.30 in the near term.
Broader Market Indicators
Concurrent with the rupee's decline, other key financial indicators showed notable movements. The dollar index, which measures the greenback's strength against a basket of six major currencies, traded marginally higher at 98.36. Meanwhile, Brent crude futures, the global oil benchmark, rose by 1.03% to reach $64.72 per barrel.
Domestic equity markets mirrored the currency's weakness, with both major indices registering substantial losses. The Sensex plunged 769.67 points to close at 81,537.70, while the Nifty declined 241.25 points to settle at 25,048.65. Exchange data revealed that foreign institutional investors had offloaded equities worth Rs 2,549.80 crore during Thursday's trading session, continuing the pattern of capital outflows that has characterized recent market activity.
