The Indian rupee plunged into uncharted territory on Friday, January 23, 2026, briefly hitting an unprecedented 92 against the US dollar before settling at a record closing low of 91.88. This landmark breach caps a period of intense pressure, with the currency slumping over 2% in January alone and marking its position as the worst-performing Asian currency this week. The fall has ignited political controversy and raised concerns about the economic outlook amid sustained foreign capital flight and global uncertainties.
The Immediate Triggers: A Perfect Storm of Outflows and Uncertainty
The rupee’s dramatic slide is attributed to a confluence of immediate factors:
- Sustained Foreign Investor Exodus: Foreign Portfolio Investors (FPIs) have been relentless sellers, withdrawing a massive ₹36,500 crore from Indian equities in just the first 22 days of January. This follows a net outflow of $18.91 billion in 2025. This selling creates direct dollar demand, weakening the rupee.
- Global Risk-Off Sentiment: Analysts point to "risk-off sentiment in global markets" driven by trade tensions and geopolitical worries. Specific concerns include stalled India-US trade talks and US tariff policies under President Trump, which have created an "atmosphere of uncertainty".
- Broad-Based Dollar Demand: Importers and corporates are scrambling to buy dollars ahead of key events like the Union Budget, exacerbating the local currency's decline.
Expert Warnings: More Pain Ahead?
Market experts see limited short-term relief and warn of further depreciation. Anuj Choudhary of Mirae Asset ShareKhan expects the rupee to "trade with a negative bias" due to FPI selling and global sentiment, with a potential range of 91.60 to 92.30. Some forecasts are more stark.
A dealer at a state-owned bank told Business Standard, "We might see the rupee breaching 93 per dollar soon". This view is echoed by treasury experts who cite panic buying from importers and a lack of dollar-selling from exporters expecting further falls.
Political Fallout and the "Speechless" Jab
The record low immediately entered political discourse. Shiv Sena (UBT) leader Aaditya Thackeray slammed the central government, claiming "the BJP is speechless when it comes to giving an explanation on the issue." He labelled the rupee "one of the worst-performing currency[s] in the world," turning the economic event into a political weapon against the ruling party.
A Silver Lining? Exports, the RBI, and Long-Term Context
Despite the alarming headlines, the situation differs fundamentally from past currency crises like the 2013 "taper tantrum." Back then, India was tagged one of the "Fragile Five" with a high current account deficit and inflation. Today, macroeconomic buffers are stronger.
A key question is whether a weaker rupee helps exports. The answer is complex. While a cheaper currency should make Indian goods more competitive, a recent Exim Bank study presents a counterintuitive finding: due to high import dependence in key export sectors, rupee depreciation can increase production costs and may not boost exports as expected.
Table: Sectoral Impact of a Weaker Rupee
| Likely to Benefit | Likely to Be Adversely Affected |
| Information Technology (IT) Services | Oil & Gas (Importers) |
| Pharmaceuticals | Aviation |
| Textiles | Electronics |
| Agriculture & Food Products | Companies with Foreign Debt |
The Reserve Bank of India's (RBI) role is crucial. Analysts note the central bank has intervened in "small amounts" but shown recent restraint. This is likely a deliberate policy choice. As noted by Kotak Mahindra Asset Management, the RBI manages the pace of depreciation to avoid volatility but does not defend a specific level. The RBI possesses a substantial "war chest" including a large short forward book, giving it firepower to smooth extreme moves.
Adjustment, Not Collapse
The breach of the 92 mark is a significant psychological milestone reflecting real global headwinds and capital flight. While near-term pressure may push the rupee toward 93, the broader assessment from economic institutions suggests this is a managed adjustment rather than a collapse. The resilience of India's domestic economy, controlled inflation, and the RBI's strategic buffers provide a backdrop very different from historical emerging market crises. The focus now shifts to the upcoming Union Budget and any progress on the stalled US-India trade deal, which could be pivotal in altering the currency's trajectory.
