The Indian rupee tumbled to a new record low on Wednesday, caught in the crosscurrents of sustained foreign capital outflows and a prolonged stalemate over a U.S. trade deal that has sapped investor confidence. Heightened geopolitical tensions across global markets have only added to the strain, pushing the currency deeper into uncharted territory.

The rupee slumped to a fresh all-time low of 91.72 against the U.S. dollar in intraday trade, marking its sharpest single-day fall since November 21, 2025. The currency weakened by as much as 75 paise, or 0.83%, during the session as heightened global risk aversion and sustained capital outflows from emerging markets dampened sentiment.

According to intra-day data, the rupee opened at 91.05 and traded in a wide range, touching a low of 91.724 and a high of 90.961 against the greenback. It eventually closed the day 44 paise weaker at 91.533.

The decline follows a subdued session on Tuesday, when the rupee slipped 7 paise to end at record low of 90.97 per dollar. The currency has been steadily edging lower in recent weeks, having previously hit an intraday low of 91.14 and its weakest closing level of 90.93 on December 16, 2025, underscoring persistent pressure from global and domestic headwinds.

The domestic unit has now depreciated by nearly 1.5% so far in January 2026, after breaching the psychological level of ₹91 per dollar mark in mid-December 2025.

Analysts see further downside risks

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, said the rupee’s fall is being driven by multiple global and domestic factors.

“USD/INR has surged to record highs near 91.70, driven by sustained FPI outflows, adverse global risk sentiment stemming from geopolitics and U.S.–India trade frictions, and a slowdown in exporter dollar conversions even as importer hedging demand remains strong. RBI intervention is helping smooth volatility but is not reversing the trend,” Banerjee said.

He added that in the near term, USD/INR could extend towards 92–92.50, with markets watching progress on trade negotiations and signals from the Union Budget on February 1. “Over the medium term, the rupee looks undervalued, but stabilisation will require improvement in capital flows and global risk appetite,” he said.

Global risk-off, FPI outflows weigh

Forex experts said the latest leg of weakness reflects heightened uncertainty in global markets, triggering risk-off sentiment and volatile capital flows out of emerging economies like India. Heavy foreign portfolio investor (FPI) outflows from domestic equities, coupled with a delay in clarity on a India–U.S. trade agreement, have added to the pressure.

So far this month, foreign portfolio investors (FPIs) have withdrawn ₹32,253.55 crore from Indian equity market, with gross purchases of ₹1,53,046.26 crore offset by gross sales of ₹1,85,299.81 crore. On January 20 alone, FPIs were net sellers to the tune of ₹2,938.33 crore.

In contrast, domestic institutional investors (DIIs) remained net buyers, helping cushion the impact of foreign outflows. Month-to-date, DIIs have infused a net ₹41,976.70 crore into equities, with gross purchases of ₹2,24,667.96 crore against sales of ₹1,82,691.26 crore. On January 20, DIIs recorded net purchases of ₹3,665.69 crore.

Geopolitics adds to currency turbulence

Geopolitical tensions have further clouded sentiment. Friction between the US and Europe over the Greenland dispute, raising concerns over strains within NATO, and developments around US control over Venezuela’s oil reserves, have created ripple effects across global trade and commodity markets.

“For India, the pending trade agreement with the US remains a key stabilizing factor, as its conclusion could boost confidence and bilateral commerce. Also, until the geopolitical risk eases, and the trade deal materializes, the rupee is likely to remain vulnerable to external shocks,” said Abhishek Bisen, Head-Fixed Income, Kotak Mahindra AMC.

According to Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services, the local unit has remained under selling-pressure amid concerns over higher trade deficit due to elevated bullion prices, persistent liquidation among foreign investors, and continued corrective move in domestic equities. “Also some short-covering was seen in the NDF market
However, a fall beyond 91.75 was curtailed by a weaker dollar in the international market,” he said.

Bullion rally, trade worries pressuring INR

Jateen Trivedi, VP – Research Analyst (Commodity and Currency) at LKP Securities, pointed to rising commodity prices as an additional drag.

“The rupee traded weak below 91.60, down nearly 0.70%, as rising geopolitical tensions involving Europe and Greenland, along with fresh concerns over U.S. tariff actions and the lack of a confirmed India–US trade deal, continued to weigh on sentiment. A sharp rally in bullion prices has further pressured the rupee by inflating the import bill,” Trivedi said.

He expects the currency to remain volatile in a broad range of 90.90–92.00 in the near term.

Technical levels, RBI intervention in focus

Dilip Parmar, Senior Research Analyst at HDFC Securities, said the pace of depreciation has been unusually aggressive.

“The rupee has plunged to a record low as heavy foreign capital outflows and prolonged uncertainty over a U.S. trade deal weigh on sentiment. Despite intermittent RBI intervention, the market has struggled to find a meaningful floor,” Parmar said.

From a technical perspective, he sees support near 91.08, with immediate resistance around 92.05.

Vinod Nair, Head of Research at Geojit Investments Limited, said currency weakness is feeding into broader market volatility.

“Domestic markets were gripped by volatility as global risk factors dampened sentiment. Tepid earnings from banking and IT sectors are adding pressure. The weakening INR and uncertainties surrounding trade ties may prolong this volatility, though selective opportunities could emerge as domestic demand remains resilient,” Nair said.

Outlook

While the near-term outlook for the rupee remains uncertain amid global headwinds, analysts believe India’s macro fundamentals, controlled inflation and ample FX reserves provide a buffer. Until global risk sentiment improves and trade-related clarity emerges, however, the currency is expected to remain under pressure and vulnerable to external shocks.

Bisen of Kotak Mahindra AMC said that India’s strong foreign exchange reserves give the RBI adequate room to manage the situation. He added that the recent depreciation has made the rupee relatively cheaper on a real effective exchange rate (REER) basis, which could help support exports. While global conditions remain uncertain, he said the domestic economy continues to show resilience.