Rupee Under Pressure As Dollar Strength Persists
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- Last Updated: 06 Jan 2026 at 1:17 PM IST
The rupee’s steady drift lower is beginning to look less like a one-off reaction and more like a structural adjustment. After closing at 90.27 against the dollar on Monday, the local currency has now weakened for four straight sessions, with dealers and analysts warning that the balance of risks still points towards further slippage rather than a quick rebound.
Why Is The Rupee Under Sustained Pressure?
Monday’s move was modest in isolation, just seven to eight paise. But the context matters. The rupee has slipped from 90.19 at the end of last week despite intermittent support from the Reserve Bank of India. Traders said the central bank stepped in around the 90.29–90.30 zone to smooth volatility but stopped short of a forceful defence.
The intervention appeared aimed at preventing disorderly moves rather than reversing the broader trend. In other words, the RBI seems comfortable allowing gradual depreciation as long as markets remain orderly. Several overlapping factors are weighing on the currency.
Trade talks between India and the US are dragging on longer than expected. Foreign investors have been cutting back exposure to Indian stocks. At the same time, global uncertainty has increased demand for the dollar as a safe-haven currency.
What Are Markets Signalling On RBI’s Strategy?
The price action indicates that the RBI is painting a soft line and not a hard line. USD/INR traded in a tight range on Monday, closing at 90.28 after touching an intraday low of around 90.50. This indicates the central bank is focused on curbing unnecessary volatility rather than defending any particular level.
This is more in sync with the overall macro trends. Allowing a weaker rupee can thereby cushion the effects of external shocks, especially when the pressure on the portfolio flows becomes intense. This will also ensure that the forex buffers are retained when the country faces actual turbulence.
What Does It Look After Crossing The 91 Mark?
In 2025, the rupee had briefly breached the 91-per-dollar mark for the first time, extending losses to more than 6% in the year. Meanwhile, foreign investors sold more than $18 billion worth of Indian equities, putting pressure on both the currency and benchmark indices. Analysts quoted by Reuters said the central bank is likely to continue tolerating a weaker rupee as India’s external sector faces multiple headwinds, from tariffs to volatile global capital flows.
At the same time, there are offsets. Export data has shown resilience, with shipments to the US rising sharply in November and the trade deficit narrowing to a five-month low. These factors may slow the pace of depreciation but are unlikely to trigger a sustained reversal on their own.
What Should Investors Watch From Here?
At present, at least the path of least resistance remains higher for the USD/INR. A strong dollar, a fragile global risk appetite, and unresolved trade talks make a strengthening rupee difficult. Chasing the move has also been advised against by Mitsubishi UFJ Financial Group (MUFG), who instead see strong levels but a weak upside impulse on the pair.
The next inflection point is likely to be driven by policies or geopolitics and not primarily by domestic data trends. A trade breakthrough with the US, a marked reversal in foreign portfolio flows, and/or a change in the RBI's intervention strategy could change the rupee's direction.
Until now, the gradual weakening of the rupee appears more like a correction and less like a warning sign. The real question is whether this slow drift stays calm or whether a fresh global shock forces the currency into a sharper move.
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