The Indian rupee, which had been holding above the 90-level mark, finally lost the battle after nearly two weeks and closed at 90.20 against the US dollar.
The currency had opened at 89.93, slid through the day, and was trading at the 90.12 mark by the afternoon session. Analysts added that the currency fell owing to a firm dollar index and steady dollar demand for the settlement of year-end payments.
Further, high prices of precious metals like gold and silver added pressure to the local currency. High prices of precious metals tend to increase dollar demand by widening the country’s import bill, thereby adding to rupee weakness.
Will the RBI intervene?
Earlier in December, the rupee had breached not just the 90, but also the 91-level mark. This led to heavy intervention by the RBI, which sold dollars aggressively to help curb speculative positions in the market.
Currency experts had already said that the Indian rupee would be under strain until a trade deal with the US is finalised. While policymakers have said that India and the US are likely to strike a trade deal by March, until then, bankers have said that the currency would trade between the 90–93 range.
An author wrote in a piece for Financial Express that the RBI has reduced dollar sales in the market due to a mismatch between dollar demand and supply. The author added that the RBI is allowing the rupee to adjust to a lower value, as the currency’s decline coincided with a weakening of the US dollar. The limited intervention can also be attributed to India’s falling forex reserves, which had been $700 billion but dropped to $693 billion by the week ended December 19, 2025, around the time the rupee breached the 91-level mark on December 16.
FII outflow continues to weigh on the currency
For 2025, foreign investors pulled out nearly $18.4 billion from the domestic markets. The persistent outflow of foreign equities from the Indian equity market continues to add pressure on the domestic currency.
As per the provisional data for January 1, 2026, available on NSE, FPIs were net sellers of equities, having sold equities worth Rs 4,336 crore.
Outlook for Rupee
“Optimism around potential India–US trade developments in the new year could provide support, while the rupee is expected to trade in the 89.70–90.55 range in the near term,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Market participants will closely track US ADP employment, non-farm payrolls, and unemployment data next week for fresh cues, he added.
