Indian Rupee Slides to All-Time Low Near 92 Amid Fed Signals, Strong Dollar and Persistent Capital Outflows

The Indian rupee fell to an all-time low on Thursday, weighed down by sustained foreign capital outflows and increased demand for dollar hedging as concerns over further depreciation intensified. The currency weakened despite signs of resilience in the domestic economy, underscoring the dominance of global pressures over local fundamentals.

The rupee touched 91.9850 against the US dollar, breaching its previous record low of 91.9650, which was hit just last week. Market participants said the decline was driven by a strong rally in the US dollar in the non-deliverable forward (NDF) markets and broad-based weakness across Asian currencies.

Dollar Rally and Asian Currency Weakness Add Pressure

The US dollar index edged higher after the US Federal Reserve's latest policy decision, while US Treasury yields rose as the Fed acknowledged that inflation remains elevated and the labour market continues to stabilise. These developments strengthened the dollar globally, adding pressure on emerging market currencies, including the rupee.

"The rupee opening at a record low of Rs 91.99 against the US dollar reflects mounting external pressures rather than any domestic macro weakness. Persistent dollar strength, elevated US bond yields and continued foreign portfolio outflows have collectively kept emerging market currencies under stress, with the rupee being no exception,"Akshat Garg, Head - Research & Product of Choice Wealth.

RBI Intervention Likely Near Key 92 Level

As the rupee approached the psychologically important 92 mark, the Reserve Bank of India (RBI) is believed to have stepped in to curb excessive volatility. Traders indicated that the central bank likely intervened before the local spot market opened, aiming to slow the pace of depreciation.

A trader at a foreign bank said the RBI's move was intended to prevent disorderly market conditions as the currency weakened rapidly after breaching the 91 level for the first time just six trading sessions earlier. The RBI has consistently maintained that it does not target a specific exchange rate but intervenes only to manage sharp fluctuations.

Foreign Selling and Importer Demand Weigh on Rupee

The rupee also closed weaker due to strong dollar demand linked to maturing non-deliverable forward positions and month-end importer requirements. Adding to the pressure, foreign investors have sold more than $3.6 billion worth of Indian equities so far this month, further straining the currency.

Analysts noted that persistent foreign selling has remained a key headwind for the rupee, even as domestic macroeconomic indicators show improvement.

"Rupee is likely to move around the current level till RBI intervenes in the market. A sudden reversal of the trend can happen if the much delayed US-India trade deal happens. When FIIs turn buyers in India rupee can appreciate to below 90 to the dollar level," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Tariff Impact and Economic Growth Divergence

The currency has fallen nearly 2% so far this year and is down close to 5% since US President Donald Trump imposed steep tariffs on India's merchandise exports. This decline has come despite India posting robust economic growth, with GDP expanding 8.2% in the quarter ended September 30, according to official data.

Recent data also showed India's industrial production rising 7.9% year-on-year in December 2025, highlighting continued momentum in manufacturing and industrial activity.

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