The rupee’s slide on Wednesday was primarily driven by a “perfect storm” of global geopolitical tension and domestic equity weakness.While the Reserve Bank of India (RBI) reportedly intervened intermittently to prevent a free-fall, the momentum of the dollar remained too strong for the central bank to fully contain.
Key Drivers of the Record Low
- The “Greenland Dispute”: Global risk aversion spiked following U.S. President Donald Trump’s push for the U.S. to acquire Greenland. His warnings of fresh tariffs on European nations have revived fears of a broader U.S.–Europe trade war, prompting investors to flee emerging market currencies for “safe-haven” assets.
- FII Exodus: Foreign Institutional Investors (FIIs) have been net sellers in the Indian market, offloading over $3 billion in debt and equities in the first three weeks of January alone. On Tuesday alone, FIIs pulled out over ₹3,200 crore, leaving the rupee vulnerable to even modest dollar demand.
- Equity Market Slump: The domestic stock market reflected the global gloom, with the Sensex tumbling over 1,000 points earlier in the week. The lack of a recovery in the Nifty and Sensex on Wednesday provided no support for the local unit.
- Metal Importer Demand: Strong demand for the greenback from metal importers—who are hedging against rising prices—put additional intra-day pressure on the rupee.
INR vs. USD: 2026 Milestone Tracker
| Date | Event / Level | Closing Price |
| Jan 1, 2026 | Rupee enters new year in red | 89.99 |
| Jan 19, 2026 | First close past 90.90 | 90.90 |
| Jan 20, 2026 | Breaches 91.00 level | 90.97 |
| Jan 21, 2026 | Record Closing Low | 91.70 |
The RBI’s Difficult Choice
Analysts from CR Forex and Kotak Securities suggest that the RBI is currently testing its ability to intervene. While the central bank used buy-sell swaps and state-run banks to sell dollars around the 91.00 mark earlier this week, the sheer volume of global selling has pushed the “new normal” for the currency into the 91.70–92.00 range.
Outlook: Eyeing the February 1 Budget
Market participants are now looking toward the Union Budget on February 1, 2026, for a potential reversal in sentiment.8 Any signals of fiscal consolidation or measures to encourage private investment could stabilize the currency. However, if the U.S. Supreme Court upholds the legality of new Trump tariffs later this month, the rupee could face further tests toward the 92.50 mark.
