The first day of 2026 did not prove to be favourable for the Indian rupee, as the currency extended mild declines to close at 89.97 against the US dollar. The local currency, which had opened at 89.95, was down about 0.1% from its previous close of 89.87.
As per reports, the fall was largely attributed to corporate dollar demand and low trading volumes owing to the holiday season. Most international markets were closed on Thursday due to the New Year holiday.
What weighed on the rupee?
Persistent foreign equity outflows from domestic markets continued to add pressure on the currency. According to NSE’s provisional data for December 31, 2025, foreign institutional investors were net sellers of equities worth Rs 8,919 crore.
Further, data from the Clearing Corporation of India showed that for December, FPIs were net sellers of government securities worth Rs 13,198 crore, which added to pressure on the rupee.
Rupee may get some stability
While lingering tensions over the finalisation of a trade deal with the US continue to weigh on the rupee, currency experts said that if a deal materialises, the currency could start trading in the 88–89 range.
However, experts added that the rupee may struggle to defend the 90-per-dollar level if a trade deal does not come through soon.
“The rupee enters 2026 with both challenges and cushions. While global uncertainty persists, India’s strong macro base, ample reserves, and pragmatic policy framework provide stability,” Reuters quoted Amit Pabari, managing director at FX advisory firm CR Forex, as saying.
Outlook for the rupee
The Indian rupee was among the worst-performing Asian currencies in 2025, as it depreciated by nearly 5%, marking its highest annual fall in three years.
Economists said the currency could even weaken to the 92–93 levels by March if a bilateral trade deal with the U.S. does not materialise. Markets will also watch whether the RBI cuts rates at its February MPC meeting, with some brokerages expecting the central bank to deliver a 25-basis-point cut amid subdued inflation. If the RBI goes ahead with a rate cut, the rupee may face mild pressure