Daijiworld Media Network - Mumbai
Mumbai, Jan 21: The Indian rupee slumped 0.8 per cent on Wednesday to close at an all-time low of 91.71 against the US dollar, after touching an intraday low of 91.75, amid sustained foreign fund outflows and weak global risk sentiment, dealers said. Market participants warned that the local currency could soon test the 92-per-dollar mark.
The sharp fall was attributed to continued selling by foreign portfolio investors in equities, rising geopolitical tensions following US threats to acquire Greenland, and a sell-off in Japanese bonds triggered by the unwinding of yen carry trades. On Tuesday, the rupee had settled at 90.98 per dollar.
According to market sources, the Reserve Bank of India (RBI) intervened to curb excessive volatility. State-owned banks were seen selling dollars on behalf of the central bank, estimated at around $1 billion to $2 billion, when the rupee breached the 91.74 level in the spot market. The RBI also conducted unofficial buy-sell swaps of various tenures in the forward market, which helped contain a sharper fall.
“This was the RBI’s intervention zone. They sold roughly $1 billion to $2 billion and also carried out some unofficial swaps in the forward market,” a market participant said.
Wednesday’s decline marked the third-worst session for the rupee in the current financial year. After emerging as the weakest-performing Asian currency in 2025, the rupee has again slipped to the bottom of the regional pack in January, depreciating nearly 2 per cent so far this month. In the current financial year, the currency has weakened by 6.80 per cent.
Latest data showed that the RBI’s outstanding net short dollar position in the rupee forward market rose to $66.04 billion at the end of November, up from $63.6 billion in October.
Dealers said near-term pressure on the rupee is likely to persist. “The move has been driven by importer demand, equity outflows and offshore buying in the NDF market after spot breached the previous high of 91.09. With dollar demand continuing till month-end, the depreciation bias may sustain, though RBI intervention could limit volatility,” said Sameer Karyatt, executive director and head of trading at DBS Bank India.
The local unit also recorded its steepest single-day fall in two months, the sharpest since November 2, 2025.
Global factors continue to weigh heavily on the rupee. “The record low reflects sustained FPI outflows, adverse global risk sentiment due to geopolitics and US–India trade frictions, and reduced exporter dollar selling even as importer hedging demand remains strong. RBI intervention is smoothing volatility but not reversing the trend,” said Anindya Banerjee, head of commodity and currency research at Kotak Securities.
Foreign outflows from Indian equities have touched $2.7 billion in January so far, adding to nearly $19 billion that exited markets in 2025.
Market participants also pointed to the impact of Japan’s rising government bond yields. “Japan has long been the cheapest source of global capital. Rising JGB yields are forcing an unwind of yen carry trades, leading to emerging market outflows, higher dollar demand and pressure on the rupee,” said Kunal Sodhani, head of treasury at Shinhan Bank India.
Although the dollar index eased marginally to 98.69 from 99.19, it failed to offer meaningful relief to the rupee amid strong local dollar demand.
Traders are now closely watching the 92 level. “The rupee is expected to approach 92 soon. The RBI appears cautious for now, but it may step in at certain levels to prevent disorderly moves,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.