Rupee Hits All-Time Low, Breaches 92 Against US Dollar

Introduction: Rupee Breaches a Critical Threshold

The Indian Rupee plunged to a historic low on January 28, 2026, breaching the psychologically significant level of 92 against the US dollar in intraday trading. The currency ultimately settled at a record closing low of around 91.90, marking a significant decline driven by a confluence of domestic and international pressures. This sharp depreciation reflects sustained selling pressure from foreign investors, robust demand for the US dollar from importers, and a broader risk-off sentiment prevailing in global markets, making the rupee Asia's worst-performing currency.

Unpacking the Drivers of the Decline

The rupee's unprecedented fall is not attributed to a single factor but rather a perfect storm of negative cues. A primary driver has been the relentless capital outflows from foreign institutional investors (FIIs). In January alone, FIIs have withdrawn nearly $1 billion from Indian equities, continuing a trend from 2025 that saw outflows of approximately $18 billion. This mass repatriation of funds has created immense demand for the US dollar, overwhelming the market. The persistent selling has contributed to a stock market sell-off that has erased an estimated $160 billion in value so far this year, further souring investor sentiment.

Global Headwinds and Trade Policy Jitters

External factors have significantly compounded the pressure on the rupee. Global investors are increasingly moving towards safe-haven assets like the US dollar amid geopolitical tensions and economic uncertainty. Furthermore, concerns over US trade policies, including tariffs of up to 50% on certain Indian exports, have kept investors on edge. While India's recently concluded free trade agreement with the European Union is seen as a strategic long-term positive, it has introduced short-term uncertainty regarding the potential reaction from the United States, reinforcing risk aversion. Rising global crude oil prices, with Brent crude trading above $17 per barrel, have also widened India's import bill, adding to the demand for dollars.

Domestic Market Reaction

The currency's weakness has been mirrored in the domestic equity markets. The Sensex plummeted by 769 points to settle at 81,537.70, while the Nifty 50 index fell by 241 points to close at 25,048.65. This downturn reflects the interconnectedness of foreign fund flows, currency stability, and equity valuations. The sustained FII selling directly impacts stock prices, and the resulting market weakness further discourages foreign investment, creating a negative feedback loop that weighs heavily on both equities and the rupee.

Key Data Snapshot: USD/INR Movement

The Central Bank's Position

Market participants have been closely watching the Reserve Bank of India (RBI) for any signs of intervention to curb the rupee's slide. While the central bank has reportedly been selling dollars, analysts suggest the intervention has not been aggressive enough to reverse the powerful depreciation trend. The country's foreign exchange reserves remain robust, having jumped by over $14 billion to $101.36 billion in the week ending January 16. However, the RBI appears to be allowing the currency to adjust to market forces, possibly to maintain the competitiveness of Indian exports, even as it manages volatility.

Analyst Outlook and Projections

Forex analysts remain cautious about the rupee's near-term prospects. Anuj Choudhary of Mirae Asset ShareKhan noted that the rupee is expected to trade with a negative bias, with a likely range of 91.60 to 92.30, citing continued FII selling and importer demand. Similarly, Dilip Parmar of HDFC Securities described the outlook for the USD-INR pair as "resolutely bullish," anticipating that the currency could soon surpass the 92 mark. These views suggest that without a significant shift in capital flows or a major policy intervention, the path of least resistance for the rupee is further weakness.

Conclusion: Navigating a Volatile Period

The Indian Rupee's fall to a record low underscores its vulnerability to global capital flows and trade uncertainties. The combination of persistent FII selling, strong domestic dollar demand, and a risk-averse global environment has created significant headwinds. While India's domestic economic indicators like PMI remain strong, they have been overshadowed by these external pressures. Looking ahead, the market will focus on the upcoming Union Budget for fiscal cues and any potential actions from the RBI to stabilize the currency. Until then, the rupee is expected to remain under pressure.