Indian Rupee Hits Record Low of 91.7 vs Dollar in 2026

Introduction: Rupee Breaches New Lows

The Indian rupee weakened to a historic low on January 28, 2026, falling to approximately 91.7 against the US dollar. The currency's decline reflects sustained pressure from a combination of persistent foreign capital outflows, robust dollar demand from domestic importers, and broader risk aversion in global markets. This new record low extends a period of significant depreciation for the rupee, which has been among Asia's worst-performing currencies amid challenging economic conditions.

A Persistent Decline in Value

On January 28, the USD/INR exchange rate climbed to 91.7370, a 0.32% increase from the previous session. This movement is part of a larger trend that has seen the rupee weaken by 2.04% over the past month and 5.93% over the last year. Throughout January 2026, the currency has been volatile, touching an all-time intraday low of 92.12. The consistent downward pressure highlights investor concerns despite strong domestic macroeconomic signals, such as healthy manufacturing and services PMI data for January.

The Driving Force: Foreign Capital Outflows

The primary catalyst for the rupee's depreciation has been the relentless selling of Indian assets by foreign portfolio investors (FPIs). Foreign investors have repatriated significant funds following a sharp sell-off in the Indian stock market, which has erased an estimated $160 billion in value so far this year. In January alone, foreign investors withdrew nearly $1 billion from Indian equities, following outflows of around $18 billion in the previous year. This large-scale exit creates substantial demand for US dollars, directly weakening the rupee.

Global Factors and US Trade Policy

Global economic uncertainty is compounding the pressure on the rupee. Investors are increasingly favoring safe-haven assets like the US dollar due to geopolitical tensions and volatile trade policies. Market attention is also fixed on India's recent free trade agreement with the European Union. While viewed as a strategic positive, there is uncertainty regarding the US administration's reaction to the deal. This has reinforced risk-averse sentiment among investors, who remain cautious about India's exposure to potential US tariffs on goods and oil imports.

The Role of the Reserve Bank of India

The Reserve Bank of India (RBI) has been active in the foreign exchange market to manage the rupee's decline. The central bank has reportedly intervened by selling dollars to curb excessive volatility. For instance, data shows the RBI sold $1.7 billion in November 2025 to support the currency. However, analysts note that the RBI's interventions appear focused on smoothing the depreciation rather than defending a specific level. In some trading sessions, a perceived absence of RBI intervention allowed the rupee's losses to deepen.

Domestic Demand and Market Sentiment

Alongside foreign outflows, strong dollar demand from domestic importers and corporations for their overseas payments has contributed to the rupee's weakness. A widening import bill, partly driven by elevated prices for commodities like crude oil and gold, has further strained the currency. The combination of these factors has created a challenging environment, with market sentiment remaining largely bearish in the short term.

Key Data Snapshot

Analyst Outlook and Projections

Market analysts maintain a cautious outlook for the rupee in the immediate future. Some forecasts suggest the currency could weaken further to test the 92.25 level, driven by continued FPI outflows and global pressures. Anindya Banerjee of Kotak Securities noted that markets are looking toward the upcoming Union Budget for cues that could stabilize the currency. Looking further ahead, some analysts are more optimistic. Abhishek Goenka of IFA Global expects the rupee to improve in FY27, potentially averaging below 90, supported by better valuations and stable inflation. Trading Economics models forecast the rupee at 91.39 by the end of the current quarter and at 90.20 in 12 months.

Conclusion: Navigating a Challenging Environment

The Indian rupee's fall to a record low is the result of a confluence of powerful domestic and international factors. Sustained capital outflows remain the most significant headwind, amplified by global risk aversion and trade policy uncertainties. While the RBI's interventions provide some stability, the currency's trajectory will largely depend on a shift in foreign investor sentiment and clarity on the global trade landscape. Upcoming events, particularly the Union Budget, will be closely watched for policy signals that could influence capital flows and provide direction for the rupee.