The Indian rupee is just a whisker away from breaching the crucial 92 level yet again, as the currency saw one of its worst falls today. The currency opened at the 91.91 level and then moved up a bit to 91.89 in the afternoon session, as traders reported that the central bank was selling dollars to avoid further depreciation.
However, the odds did not play out in favour of the currency, as it closed at the 91.98 mark, just shy of the 92 level. Despite today’s crash in the prices of precious metals, the currency witnessed one of its worst months. It is no surprise that the central bank stepped in on the last trading day of January, and that too a few days ahead of the Union Budget 2026 and the RBI MPC meeting.
So what exactly is happening that is driving the currency?
US dollar keeping the pressure high
The rupee is steadily losing its value amid tariff threats, geopolitical risks, and economic tensions. Also, the dollar index, which had fallen to its four-year low yesterday, rebounded slightly today, which also affected the rupee.
A stronger dollar usually depreciates the value of emerging market currencies like the Indian rupee.
Meanwhile, the RBI is trying to hold the rupee. “In the onshore (Indian) market, USD/INR is hovering just below the psychologically important 92.00 level, while the offshore NDF market has already moved past it—signalling that the Reserve Bank of India has likely been intervening to defend this threshold,” CR Forex Advisors MD Amit Pabari told FinancialExpress.com
High prices of precious metals creating downward pressure on the rupee
While prices of precious metals like gold and silver took a hit today, they are still trading near their record high levels. India is a net importer of gold and silver, so high prices of precious metals essentially mean a bigger import bill, which worsens the country’s current account. This is putting downward pressure on the rupee’s value.
“This effect tends to become more pronounced during periods of global uncertainty, when rising gold prices coincide with heightened risk aversion and weaker portfolio flows into emerging markets,” Pabari added.
RBI’s gold buying offers stability, but keeps the rupee exposed
As per the latest data released by the RBI, India’s foreign exchange reserves for January 23 were up by $8 billion, reaching a high of $709.41 billion. Also, the central bank’s gold holdings jumped by $5.6 billion over the week.
Pabari said that the increase in gold in India’s forex reserves points towards the RBI’s diversification strategy over the long term. However, he added that this also points to the near-term sensitivity of the rupee to elevated gold prices.
“Overall, if gold prices remain firm due to global rate uncertainty or geopolitical stress, the rupee is likely to trade with a depreciation bias,” he added.
Outlook for the Rupee
Analysts have added that the Union Budget 2026, which will be presented on February 1, will provide a clearer view of what lies ahead for the rupee. The Economic Survey presented on January 29 also said that the Indian currency’s valuation does not reflect the country’s stellar economic fundamentals.
Pabari said that if the Indian (onshore) markets breach past the 92 level, the rupee would depreciate further, with its key resistance zone at 92.30–92.50. However, aggressive intervention by the RBI can flip the tables and ease the currency back towards the 91.00–91.20 range in the near term, he added.
Additionally, Donald Trump’s nomination of former Federal Reserve governor Kevin Warsh as the next chair of the US Federal Reserve will likely weigh on the currency, as Warsh holds relatively hawkish views.