The Indian rupee mirrored the fall in the equity markets and breached past the 91 level mark yet again, hitting its lowest level in 2026.
The currency, which had been trading weak over the past few sessions, opened at a low of 90.93 and slumped to 91.05 in the early trade session before recovering a bit and closing at 90.97 against the greenback.
Traders said that state-run banks sold dollars on behalf of the RBI to support the rupee and move it towards the 90 range. Let us look at what caused the breach.
What triggered the sharp fall in rupee?
- Geopolitical tension
Analysts have said that the geopolitical tensions surrounding the US and Greenland have weighed on emerging market currencies. US President Donald Trump has warned of fresh tariffs on eight European nations unless the US is allowed to buy Greenland.
“The announcement of a 10% import tariff from February 1, potentially rising to 25% from June, has raised the risk of retaliatory action from Europe, reinforcing a risk-off environment that is typically unfavourable for emerging market currencies,” CR Forex Advisors MD Amit Pabari told FinancialExpress.com in a note.
- Demand for precious metals
With lingering geopolitical uncertainties, safe-haven demand for precious metals like gold and silver has bolstered, which has further weighed on the domestic currency.
“The continued global uncertainties, including US pressure on Greenland, have led to a risk-off sentiment in markets. This has led to strong demand for precious metals, with gold and silver prices touching an all-time high. The risk-off sentiment, along with strong offshore hedging in USDINR, has led to USDINR touching 91 per dollar,” said Sameer Karyatt, Executive Director and Head of Trading at DBS Bank India.
- Persistent selling of foreign equities
Persistent selling of equities by foreign investors continues to add pressure on the currency. According to data available on the NSE for January 19, 2026, foreign investors have been net sellers of domestic equities worth Rs 15,088 crore.
So far in January, foreign investors have pulled out over $3 billion from Indian equities, which has made the currency increasingly sensitive to even modest dollar demand, Pabari added.
- Uncertainty about India-US trade deal
Policymakers had said that a trade deal between India and the US is likely to be finalised by March 2026. However, Trump had warned of fresh new tariffs on India, which has made markets sceptical about when a trade deal will finally come through.
Currently, most Indian imports to the US face 50% tariffs. On the other hand, US policymakers have urged Trump to finalise a trade deal with India, as New Delhi levies 30% tariffs on American pulses.
Rupee outlook
Analysts have added that with the current backdrop, it is likely that the currency will see further depreciation.
Additionally, it is likely that the currency will take cues from the Union Budget, which will be presented on February 1.
The rupee is likely to trade between 90.45 and 91.45 in the near term, said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
For the longer-run outlook, Pabari has said that unless the RBI intervenes, it is likely that the currency could trade in the 91.70–92 zone. He added that the central bank is likely to intervene intermittently to curb one-sided rupee moves. He also said that support from the India-EU FTA offers a partial offset for the currency.
Will the RBI intervene?
Pabari added that the central bank is likely to intervene intermittently to curb one-sided rupee moves. Also, it may take support of liquidity-supporting tools, including buy–sell swaps and open market operations (OMOs), to balance currency stability with adequate system liquidity.