The rupee continues to decline and hit a record low against the dollar on Thursday. It ended the session at 91.9550 per dollar, down 0.2% from its previous close. Earlier in the session, it fell to 91.9850.
The rupee’s decine was pressured by dollar demand linked to the maturity of non-deliverable forward positions and corporate hedging. The street believes that the currency was able to defend the 92/$ level on possible central bank intervention.
The Weakness in the currency also spilled over to Indian government bonds, reinforcing a dilemma for the market wherein the Reserve Bank of India’s efforts to shore up banking system liquidity get blunted by its FX market interventions.
RBI intervenes to cap rupee fall amid heavy foreign outflows: Report
The Reuters quoted traders who believe that “the central bank intervened to cap the rupee’s fall.
Foreign investors have net sold over $4 billion of local stocks in January so far, adding to the record $19 billion outflow in 2025. DBS Bank India expects the rupee to fall to 93-94 this year as capital inflows dwindle.
Rupee underperforms peers, punches below its weight: Economic Survey
The India’s Economic Survey noted that , Between 1 April 2025 and 15 January 2026, the Indian rupee depreciated by approximately 5.4% against the US dollar. “This movement was somewhat larger than in the immediately preceding period, making INR one of the most depreciated currencies alongside the Japanese Yen (-5.5). Other Asian peers experienced relatively lower depreciation,” Economic Survey noted.
“The Indian rupee underperformed in 2025. India runs a trade deficit in goods. Its net trade surplus in services and remittances is not enough to offset it… When they run drier, rupee stability becomes a casualty,” It said.
The value of the rupee, which has slipped to the 92 per dollar mark, does not accurately reflect India’s stellar economic fundamentals, the Economic Survey said on Thursday. “In other words, the rupee, therefore, is punching below its weight,” it said, adding investor reluctance to commit funds to India warrants examination at a time when inflation is under control and growth outlook is favourable.
India’s economy is expected to grow 6.8%-7.2% in the next fiscal year, slightly slower than the 7.4% growth projected for the current year, as per the Economic Survey.
Rupee depreciation fears push swap rates
Expectations of the rupee depreciating further are also compounding the strain on India’s interest rate swaps market, which has contributed to pushing up overnight index swap rates to levels that price in monetary tightening, even though macro-economic indicators signal no need for it. The rupee’s weakness also stands in contrast with India’s strong economic growth numbers.