Rupee slumps to new low of 91.75 per dollar amid global risk aversion

The rupee fell to a fresh record low as foreign equity outflows, weak global risk sentiment and yen carry trade unwinding weighed on the currency, with RBI intervention limiting further losses

The rupee slumped 0.8 per cent on Wednesday to close at a new low of 91.71 per dollar after touching 91.75 during intraday trade, driven by persistent foreign outflows from equities amid deteriorating global risk sentiment following US threats to acquire Greenland and a sell-off in Japanese bonds due to the unwinding of yen carry trades, dealers said. Market participants said the rupee may test the 92-per-dollar level soon.

 

How did the RBI intervene to limit the rupee’s fall? 

Market participants said the central bank conducted unofficial buy-sell swaps of various tenures in the rupee forward market, which contained a further fall. In the spot market, state-owned banks sold dollars on behalf of the Reserve Bank of India (RBI), estimated at around $1 billion to $2 billion, when the rupee hit 91.74 per dollar.

 

 

On Tuesday, the rupee had settled at 90.98 per dollar.

 

“The RBI intervened at 91.74 per dollar. They sold around $1 billion to $2 billion. There were also some unofficial buy-sell swaps done by the RBI for various tenures,” said a market participant.

 

How severe was Wednesday’s fall in the rupee? 

This was the Indian unit’s third-worst session in the current financial year. After being the worst-performing Asian currency in 2025, the rupee has again emerged as the weakest performer in January so far, falling almost 2 per cent.

 

According to the latest data, the central bank’s outstanding net short dollar position in the rupee forward market rose to $66.04 billion by the end of November, compared with $63.6 billion at the end of October.

 

What are dealers saying about near-term rupee movement? 

“The move in the rupee has been driven by demand from importers, equity outflows, and offshore buying in the NDF market as spot broke the previous high of 91.09. Given the dollar demand till month-end, we expect the rupee depreciation bias to sustain, with bouts of intervention to contain volatility,” said Sameer Karyatt, executive director and head of trading at DBS Bank India.

 

The local currency witnessed its steepest single-day decline in two months since November 2, 2025. In the current financial year so far, the rupee has weakened by 6.80 per cent.

 

How are global factors impacting the rupee? 

“The rupee has slipped to a record low driven by a combination of sustained FPI outflows, adverse global risk sentiment stemming from geopolitics and US–India trade frictions, and a slowdown in exporter dollar conversions even as importer hedging demand remains strong. RBI intervention is helping smooth volatility but is not reversing the trend,” said Anindya Banerjee, head of commodity and currency research at Kotak Securities. Foreign outflows from Indian equities stand at $2.7 billion in January, in addition to about $19 billion in 2025.

 

Market participants said that while the dollar index slipped marginally to 98.69 from the previous close of 99.19, the unwinding of Japanese carry trades put pressure on emerging market currencies. Episodes of US dollar softness and shifting global headlines provided only fleeting relief, failing to offset persistent local flows.

 

“Japan has long been the cheapest source of global capital. Rising JGB yields are now forcing the unwind of yen carry trades, leading to EM outflows, higher dollar demand, and pressure on the rupee,” said Kunal Sodhani, head of treasury, global trading centre, FX and rates treasury at Shinhan Bank India.

 

The dollar index measures the strength of the greenback against a basket of six major currencies.

 

What levels are traders watching next? 

“The rupee is now expected to touch 92 levels soon, with the RBI presently on the sidelines, but it may step in to control the rupee at certain levels,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors.