Indian Rupee Extends Decline, Hits New Record Low Against US Dollar
The Indian rupee continued its downward trajectory on Wednesday, plunging to a fresh record low against the US dollar during early trading sessions. The domestic currency fell more than 60 paise to reach 91.74 against the greenback, extending its persistent decline amid multiple economic pressures.
Persistent Downward Pressure on Currency
This latest drop follows Tuesday's closing at a record low of 90.97, where the rupee had declined by 7 paise. The currency's weakness has been attributed to strong demand for dollars from metal importers and continued foreign fund outflows, both of which have significantly weighed on investor sentiment in recent trading sessions.
According to forex market analysts, geopolitical uncertainties have played a substantial role in increasing risk aversion among investors. Fresh expansionary signals from the United States have created additional pressure on emerging market currencies, including the Indian rupee. The currency has experienced a notable decline of 4.95% in 2025 alone, reflecting the challenging economic environment.
Multiple Factors Driving Currency Weakness
The stock market's sluggish performance has further contributed to the rupee's decline, with foreign investor exits creating additional headwinds. The currency had previously touched its lowest intra-day level of 91.14 and closing low of 90.93 against the dollar on December 16, 2025, indicating a consistent pattern of depreciation.
Foreign institutional investors have demonstrated significant selling pressure in Indian markets, offloading over $2.7 billion from Indian debt and equities so far in January, according to data from the National Securities Depository Limited (NSDL). This substantial capital outflow has created additional downward pressure on the rupee's valuation.
Central Bank Intervention and Market Sentiment
Ritesh Bhansali, deputy CEO of Mecklai Financial Services, noted that there was mild intervention around the 91/$1 levels, suggesting that the central bank was attempting to protect this psychological threshold. "The sentiment is not that great," Bhansali explained. "Foreign investors are selling from India, equities are in the red, yields on government bonds are high, and there's the hanging sword of geopolitical uncertainty."
A senior trader from a public sector bank provided additional insight, stating that the intervention was primarily aimed at controlling the pace of depreciation rather than changing the rupee's overall course. "The central bank would not want to burn its reserves as there was good dollar demand today," the trader emphasized, highlighting the delicate balance monetary authorities must maintain in managing currency stability.
Outlook for the Indian Rupee
Market analysts anticipate that the rupee will continue trading with a depreciation bias in the coming days. The combination of geopolitical tensions, foreign fund outflows, and domestic economic factors suggests that the currency may face continued pressure in the near term.
The Reserve Bank of India's approach appears focused on managing the pace of decline rather than attempting to reverse the trend entirely, reflecting the complex challenges facing emerging market currencies in the current global economic landscape.
