The Indian rupee began 2026 on a subdued footing, extending its recent losses to close at 89.97 per US dollar on Thursday. The local currency opened marginally weaker at 89.95 and ended the session about 0.1% lower compared with its previous close of 89.87.
Market participants attributed the mild depreciation largely to corporate dollar demand and thin trading volumes during the holiday-shortened session, with most global markets shut on account of the New Year.
Factors Pressuring the Rupee
Persistent foreign capital outflows continued to weigh on the currency. Provisional data from the NSE showed that foreign institutional investors (FIIs) were net sellers of Indian equities worth ₹8,919 crore on December 31, 2025.
In addition, data from the Clearing Corporation of India indicated that foreign portfolio investors (FPIs) sold government securities worth ₹13,198 crore in December, adding further pressure on the rupee.
Near-Term Stability Hinges on Trade Developments
Currency watchers noted that uncertainty surrounding the finalisation of a trade agreement with the United States remains a key overhang. A successful deal could help the rupee stabilise in the 88–89 range, while delays may make it difficult for the currency to sustain levels below 90 per dollar.
Market participants also highlighted that India’s strong macroeconomic fundamentals — including robust foreign exchange reserves and policy support — continue to provide some cushion against sharp volatility.
Rupee Outlook for 2026
The rupee was among the weakest-performing Asian currencies in 2025, depreciating by nearly 5%, its steepest annual decline in three years. Economists caution that the currency could drift towards the 92–93 range by March if trade-related uncertainties persist.
Attention will also be on the Reserve Bank of India’s February MPC meeting, where some brokerages expect a 25-basis-point rate cut amid easing inflation. Any monetary easing could exert mild additional pressure on the currency in the short term.
Disclaimer: This article is for informational purposes only and does not constitute investment or currency trading advice. Market movements are subject to domestic and global risks.
