The Indian rupee weakened past the psychologically important 90-per-dollar level, closing at 90.20 against the US dollar, after holding above the mark for nearly two weeks. Persistent dollar demand, a firm dollar index and continued foreign fund outflows weighed on the domestic currency.
The rupee opened the session at 89.93, drifted lower through the day and slipped to 90.12 by the afternoon session before settling weaker. Currency dealers attributed the decline to sustained dollar buying for year-end settlement payments, coupled with strength in the US dollar.
Rising prices of precious metals such as gold and silver also added pressure on the rupee. Higher bullion prices tend to widen India’s import bill, increasing dollar demand and exerting further strain on the local currency.
RBI intervention in focus
Earlier in December, the rupee had breached not only the 90 level but also slipped past 91, prompting heavy intervention by the Reserve Bank of India (RBI), which sold dollars aggressively to curb volatility and speculative activity.
However, market participants note that the central bank has since moderated its intervention. Analysts point out that the RBI appears to be allowing a gradual adjustment in the rupee’s value amid a mismatch between dollar demand and supply.
India’s foreign exchange reserves, which had touched nearly $700 billion, declined to $693 billion in the week ended December 19, 2025, around the time the rupee weakened beyond the 91 mark. The fall in reserves is also cited as a factor behind the RBI’s more measured approach.
FII outflows continue
Persistent foreign institutional investor (FII) outflows remain a key drag on the rupee. In 2025, foreign investors pulled out nearly $18.4 billion from Indian markets, adding sustained pressure on the currency.
Provisional data from the NSE showed that on January 1, 2026, foreign portfolio investors were net sellers of equities worth ₹4,336 crore.
Near-term outlook
Currency market participants expect the rupee to remain volatile in the near term, with attention shifting to India–US trade developments and key US economic data, including employment indicators, which could influence dollar movement and capital flows.
Disclaimer
This article is for informational purposes only and does not constitute investment, trading, or currency advice. Currency markets are subject to volatility and macroeconomic risks. Readers should consult qualified professionals before making financial decisions.
