Rupee slips to record low against US dollar amid global uncertainty and capital outflows; what does a weak rupee mean?
At its core, value of rupee, like any currency, is decided by demand and supply in forex market
PTC Web Desk: The Indian rupee weakened further on Wednesday, slipping to a fresh all-time low against the US dollar in early trade, as sustained demand for the American currency and a cautious global environment continued to weigh on investor sentiment.
In early deals, the rupee touched 91.28 per dollar, marking a fall of about 31 paise from the previous close. It also breached its earlier lifetime low of 91.0750, recorded in mid-December 2025. The domestic currency opened at 91.08 per dollar and soon extended losses, reflecting persistent pressure in the foreign exchange market.
Why is the rupee falling?
At its core, the value of the rupee, like any currency, is decided by demand and supply in the forex market. When demand for dollars rises and the supply of dollars falls, the rupee weakens.
At present, several factors are pushing up dollar demand while limiting foreign inflows into India.
A strong US dollar remains the biggest challenge. Expectations that the US Federal Reserve may keep interest rates higher for a longer period have boosted returns on US bonds. This has encouraged global investors to park their money in the US, strengthening the dollar and reducing interest in emerging market currencies like the rupee.
Adding to the pressure is heavy dollar buying by Indian importers, particularly those dealing in crude oil, energy products and industrial metals. Since India imports a large part of its oil requirement, companies need dollars to pay for these imports, increasing outflows from the domestic market.
Foreign investors pull back
The rupee has also been hit by continued selling by foreign portfolio investors (FPIs) in Indian equity markets. Global investors have turned cautious amid geopolitical tensions and uncertain global growth prospects, preferring safer assets in developed economies. As foreign investors sell Indian shares and take money out of the country, demand for dollars rises, putting further strain on the rupee.
Meanwhile, domestic stock markets remained under pressure, reflecting weak sentiment. A sluggish equity market often discourages fresh foreign investment, indirectly impacting the currency market.
Global mood remains risk-averse
Rising geopolitical tensions and renewed concerns about global economic stability have triggered a risk-off mood worldwide. In such phases, investors usually move away from riskier assets and seek shelter in safe-haven currencies like the US dollar, strengthening it further against emerging market currencies.
RBI’s stance
Market participants believe the Reserve Bank of India (RBI) is closely monitoring the situation but is not aggressively defending any specific exchange rate level. Instead, the central bank appears focused on preventing sharp volatility, allowing the rupee to weaken gradually without depleting foreign exchange reserves.
What does a weak rupee mean?
A depreciating rupee makes imports more expensive, which could add to inflationary pressures, especially through higher fuel costs. On the positive side, exporters may benefit, as they receive more rupees for every dollar earned from overseas sales.
Experts say the rupee’s near-term direction will depend on several factors, including upcoming US economic data, movements in crude oil prices, foreign investor flows, and any signs of intervention by the RBI.