The Indian rupee plunged to a historic low on Tuesday, breaching the critical 91-per-dollar psychological mark and settling at an all-time low of 90.97. This fresh record underscores a deepening currency crisis fueled by a relentless exodus of foreign capital, heightened global trade tensions, and strengthening US economic fundamentals.
The currency opened weak at 90.91 and tumbled to an intraday low of 91.06 before closing at 90.97 (provisional), marking its lowest closing level ever. Analysts point to a perfect storm of domestic outflows and international uncertainty that has left the rupee reeling.
The Triple Threat Weighing on the Rupee
Three interlinked factors are driving the rupee's precipitous fall.
Sustained Foreign Investor Flight: Foreign Portfolio Investors (FPIs) have begun 2026 as aggressive sellers, extending a massive withdrawal from 2025. In just the first two trading sessions of January, they pulled a staggering ₹7,608 crore ($846 million) from Indian equities. This sustained selling converts rupee holdings into dollars, directly increasing demand for the US currency and weakening the rupee. Outflows in January are nearing $3 billion, reinforcing risk aversion toward Indian assets.
Global Trade Tensions and "Risk-Off" Sentiment: Renewed geopolitical friction, including US expansionary signals over Greenland and broader global uncertainty, has triggered a flight to safety among investors worldwide. This "risk-off" environment prompts capital to flee emerging markets like India for the perceived safety of the US dollar and other haven assets.
A Resilient US Economy: The relative strength of the US economy, with declining unemployment and expectations that interest rates will remain elevated, continues to attract global capital. This dynamic boosts the dollar's strength against most currencies, including the rupee.
All Eyes on the US Supreme Court
Adding to the market's anxiety is an imminent ruling from the US Supreme Court on the legality of tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act (IEEPA).
A Decision with Global Repercussions: The verdict, expected any day, will determine if the president's emergency powers can be used to levy broad tariffs. A ruling upholding the tariffs could intensify the global trade war, further pressuring emerging market currencies. Conversely, a ruling against them might offer temporary relief to global trade flows and market sentiment.
High Economic Stakes: The Trump tariffs represent the largest US tax increase as a percentage of GDP since 1993 and are estimated to reduce long-run US GDP by 0.5% even before accounting for foreign retaliation. The uncertainty they create has already led to reduced hiring and investment in the US manufacturing sector.
What This Means for India: A Double-Edged Sword
A weaker rupee presents a mixed bag for the Indian economy, creating clear winners and losers.
| Potential Benefits | Potential Drawbacks |
| More Competitive Exports: Indian goods become cheaper for foreign buyers. | Imported Inflation: Cost of crude oil, electronics, and other imports rises. |
| Boost for Tourism & Remittances: India becomes a more affordable destination; NRIs get more rupees for their dollars. | Costlier Education & Travel: Studying abroad and overseas trips become significantly more expensive. |
For households, the immediate impact is felt in the wallet. The cost of imported goods, from electronics to fuel, is poised to rise. Perhaps most acutely affected are Indian students abroad and families planning foreign travel, who will need substantially more rupees to meet their dollar-denominated expenses.
Market Outlook: More Volatility Ahead
Forex analysts suggest the rupee may face further pressure. Anuj Choudhary of Sharekhan noted the currency is expected to trade with a "negative bias" due to foreign fund outflows and global risk aversion, with the USD-INR spot price potentially trading in a range of 90.70 to 91.25.
While the Reserve Bank of India (RBI) has been intervening to smooth volatility, it appears focused on preventing disorderly market moves rather than defending a specific level, signaling a tolerance for gradual depreciation. The path forward for the rupee remains inextricably linked to the flow of global capital and the unfolding script of international trade relations.
