Rupee recovers slightly from record low, but global pressures persist
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The rupee recovered from its weakest level on Friday, gaining 9 paise to trade at 91.90 against the US dollar in early deals, aided by a decline in global crude oil prices. However, sustained strength in the dollar and continued foreign fund outflows limited the extent of the recovery, forex traders said.
At the interbank foreign exchange market, the domestic currency opened at 91.89 and rose to an early high of 91.87 before trimming gains to trade at 91.90, up from its previous close of 91.99. The rupee had ended flat at its lowest-ever closing level on Thursday, after touching an all-time intraday low of 92 against the dollar on January 23.
Sharp fall in the currency has sparked concerns
While the sharp fall in the currency has raised concerns, analysts said the weakness reflects broader global factors rather than immediate domestic stress. Elevated uncertainty in global markets and slowing capital flows into emerging economies have weighed on several currencies, including the rupee.
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Higher interest rates in advanced economies have improved returns on overseas investments, prompting investors to turn more selective in allocating capital. For India, the impact is compounded by its current account deficit, which makes the economy reliant on steady foreign inflows to bridge the gap between imports and exports. Any slowdown in these flows tends to exert pressure on the currency.
Dollar index rises 0.36%
The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.36% to 96.48. Analysts attributed the strength to the US Federal Reserve’s decision to keep interest rates unchanged at the conclusion of its first policy meeting of 2026.
Lower crude prices provided some relief, with Brent crude, the global oil benchmark, falling 1.50% to $69.62 per barrel in futures trade.
Meanwhile, the Economic Survey tabled in Parliament on Thursday flagged concerns over the rupee’s performance, stating that the currency is “punching below its weight” and that investor reluctance to commit funds to India “warrants examination” at a time when inflation is under control and the growth outlook remains favourable.
CEA's view on rupee depreciation
Chief Economic Adviser V. Anantha Nageswaran on Thursday said the recent depreciation of the rupee against the US dollar is broadly in line with movements seen across other emerging market currencies and does not signal any underlying macroeconomic instability.
Addressing the Economic Survey press briefing, Nageswaran said the rupee’s weakness is largely driven by capital outflows amid higher global interest rates. He added that other emerging market economies are facing similar pressures due to elevated geopolitical risks and tighter global financial conditions.