The Indian rupee continued its downward slide for the third straight session, falling by 10 paise to 90.44 against the US dollar on Friday. The currency’s decline reflects a mix of external and domestic pressures, even as lower crude oil prices and positive equity sentiment provided temporary relief.
Forex traders noted that the rupee initially opened at 90.37 in the interbank market but quickly depreciated to 90.44, following a pattern of gradual weakness observed over the past few days. On Wednesday, the rupee had ended at 90.34, down 11 paise, after slipping 6 paise the previous day.
1. Strong US Dollar Keeps INR Under Pressure
The US dollar hit a six-week high following robust labor market data. Initial jobless claims for the week ending January 10 fell to 198,000, well below the anticipated 215,000. This highlighted the resilience of the US economy and reinforced market expectations that the Federal Reserve is unlikely to cut interest rates soon.
As a result, emerging market currencies, including the Indian rupee, faced added pressure against the strong dollar.
2. Hawkish Federal Reserve Signals
US Federal Reserve officials maintained a hawkish stance, focusing on inflation control. Comments suggested that any potential rate cuts would require sustained progress toward the 2% inflation target.
“This hawkish tone from the Fed has strengthened the dollar and created additional headwinds for the rupee,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd.
3. Rising Trade Deficit
India’s merchandise trade deficit widened slightly to $25.04 billion in December from $24.53 billion in November, primarily due to increased imports. A higher trade gap implies more dollars leaving the economy than coming in, exerting a gradual but steady strain on the rupee.
4. Delay in India-US Trade Deal
India is in the process of negotiating major trade agreements with the US and the European Union, but no firm timeline has been provided for the US-India deal.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd, noted, “Without progress on the US-India trade agreement, the rupee is likely to remain under pressure. A positive outcome could attract foreign inflows and stabilize the currency.”
5. Persistent Foreign Portfolio Investor (FPI) Outflows
Foreign investors have been net sellers since the start of the year. In January alone, FPIs sold Indian equities worth ₹19,015 crore, reflecting cautious sentiment.
“Until confidence improves, every surge in the dollar weighs heavily on the rupee, and any recovery attempts face immediate hurdles,” analysts said.
INR Outlook
Experts predict continued volatility for the rupee. Amit Pabari, MD of CR Forex Advisors, stated that USD/INR may face resistance in the 90.30–90.50 range, with a potential upward path toward 91.20–91.50. On the downside, 89.50 is considered key support. Dr. VK Vijayakumar expects the rupee to trade in the 88–91 range during H1 2026, while Rahul Kalantri anticipates short-term fluctuations amid dollar index volatility, domestic equity movements, and geopolitical tensions.
The key highlights show that the rupee has dropped to 90.44 against the US dollar, marking the third consecutive session of decline. Strong US labor data and hawkish Fed comments continue to support the dollar. India’s trade deficit has widened slightly, adding pressure on the rupee, while delays in the US-India trade agreement limit positive foreign investor sentiment. FPIs remain net sellers, with outflows exceeding ₹19,000 crore in January alone.
The rupee remains on a narrow path, supported by RBI interventions but tested by external and domestic headwinds, signaling cautious trading ahead.