Rupee Hits Record Low at 91.98 Against US Dollar

Rupee Hits Record Low at 91.98 Against US Dollar

Why in News? 

Recently, the Indian rupee plunged to a record low of ₹91.98 against the U.S. dollar, marking its worst monthly drop in over three years as persistent foreign fund outflows and strong corporate demand for dollars weighed on the currency, despite Reserve Bank of India interventions to stem the fall.

Current Exchange Rate Scenario and Historical Trends

• Latest Record Levels of the Indian Rupee: As of January 29–30, 2026, the Indian rupee (INR) declined to a record low of around ₹91.98–₹91.99 per US dollar (USD) in the spot and closing markets, nearing the psychological ₹92/$ mark before slight recovery attempts. This represents the weakest level in the currency’s trading history against the dollar.
• Recent Movements and Intra‑Day Fluctuations: On several occasions in late January 2026, the rupee touched intra‑day lows close to ₹92/$ before closing slightly above this threshold. Earlier sessions in the same period saw the currency hovering between ₹91.82 and ₹92.00, reflecting heightened volatility in the forex market.
• Short‑Term Performance Pattern: In January 2026 alone, the rupee has depreciated by roughly 2% year‑to‑date, marking its worst monthly performance since September 2022. In 2025, the rupee had already weakened about 5% against the US dollar, driven by persistent external pressures.
• Historical Benchmarks Over Recent Years: The rupee’s recent trajectory continues a multi‑year depreciation trend. For context, the currency has been trending weaker since 2022 and 2023, when levels below ₹75/$ were observed. Over a three‑year window ending in late 2025, this translates into significant cumulative depreciation against the dollar.
• Earlier All‑Time Lows Before 2026: Before the latest record, the rupee first breached ₹90 per dollar in late 2025, setting new intra‑day and closing lows near ₹90.78–₹90.93/$. That breach marked a significant psychological threshold in forex markets.
• Comparative Historical Context: If we extend further back, the rupee’s depreciation trend spans decades. For example, the currency moved from roughly ₹12/$ in the mid‑1980s to the ₹90+ levels in 2025–26, reflecting structural economic shifts.

Factors Driving the Rupee’s Decline

• Foreign Capital Outflows and Investor Sentiment: A key driver of the rupee’s recent decline is persistent foreign institutional investment (FII) outflows from Indian equity and debt markets, as overseas investors have been withdrawing billions of dollars. In January 2026 alone, equity outflows reached about $4 billion, on top of roughly $19 billion in 2025, significantly increasing demand for US dollars.
• Strong US Dollar and Global Risk Aversion: The US dollar’s strength globally, supported by relatively higher yields on US Treasury securities and persistent demand as a safe haven in risk-off conditions, puts pressure on emerging market currencies including the rupee. Heightened global risk aversion—driven by geopolitical uncertainties and concerns over trade relations—amplifies demand for dollars, weakening the rupee. 
• Trade Deficit and Import-Driven Dollar Demand: India’s widening merchandise trade deficit also fuels rupee depreciation. A substantial portion of India’s imports—particularly crude oil, gold, electronics, and machinery—must be purchased in US dollars, leading to robust dollar demand. When import costs rise relative to export earnings, the supply-demand imbalance in forex markets inherently pushes the rupee down.
• Trade Uncertainty and Tariffs: Unresolved trade negotiations and tariff disputes, especially with the United States, are significant structural contributors to rupee weakening. High US tariffs—up to 50 % on some Indian goods—have dampened export competitiveness and clouded investor confidence, discouraging sustained capital inflows and fostering dollar demand for hedging.
• Interest Rate Differential: Another major factor is the interest rate differential between India and advanced economies like the US. When the US Federal Reserve maintains higher interest rates relative to India, foreign capital gravitates toward dollar-denominated assets for better returns. This dynamic increases demand for USD and depresses INR value.
• Corporate Hedging and Importers’ Dollar Demand: Corporate demand for dollars via derivative hedging positions, import bills, and non-deliverable forwards (NDF) settlements, particularly near month-ends and contract maturities, creates short-term spikes in dollar demand. These technical demand pressures further weaken the rupee as financial institutions and corporations secure dollars in advance amid expectations of continued depreciation.

Policy Measures and RBI Interventions

• RBI’s Liquidity Injection Programmes: The Reserve Bank of India (RBI) has implemented large-scale liquidity infusion measures into the banking system to counter tightening conditions caused by foreign exchange interventions and market volatility. In January 2026, the RBI announced plans to inject over ₹1.25 trillion through open market operations (OMOs), Variable Rate Repo (VRR) auctions, and USD/INR buy-sell swaps, aiming to ease credit conditions.
• Open Market Operations (OMO) to Stabilise Markets: The RBI has scheduled significant OMO purchases of government securities totaling ₹1 trillion in multiple tranches. These purchases are designed to put surplus rupee liquidity into the banking system, support lower bond yields, and improve monetary transmission. By lowering systemic borrowing costs, these operations also indirectly relieve pressure on the rupee.
• Dollar-Rupee Buy-Sell Swap Agreements: To provide longer-term rupee liquidity, the RBI has executed USD/INR buy-sell swaps, including auctions of $10 billion with a three-year maturity. Under this strategy, the RBI swaps dollars for rupees now and agrees to reverse the transaction later, bolstering durable liquidity without permanently reducing forex reserves. Such swaps help calm market expectations.
• Repo Rate and Monetary Policy Stance: Despite the rupee’s fall, the RBI’s Monetary Policy Committee (MPC) maintained a neutral stance and opted for a repo rate of 5.25 % in December 2025, reducing it by 25 basis points amid low headline inflation and solid GDP growth forecasts. This measured approach balances supporting expansion with preventing sharp currency volatility.
• Promotion of Rupee Internationalisation: The RBI has introduced initiatives to internationalise the rupee by permitting broader use of Special Rupee Vostro Account (SRVA) balances and encouraging bilateral trade settlements in INR. These measures aim to reduce dependence on the US dollar in cross-border transactions.