The Indian rupee started the new year on a negative note, as the currency depreciated 11 paise to 89.99 against the US dollar in early trade on Thursday, January 01, amid foreign fund outflows.
Forex traders noted that the rupee has begun 2026 facing a mix of headwinds and supports. While global uncertainty remains, India’s solid macroeconomic fundamentals and healthy foreign exchange reserves continue to offer stability.
In the interbank foreign exchange market, the rupee opened at 89.94 per US dollar, and weakened during the session to touch 89.99.
In the final trading session of 2025 on Wednesday, the rupee had closed at 89.88 against the US dollar.
What’s behind the fall in the Indian rupee?
Thursday’s price movement mirrors the broader trend observed through much of 2025, with underlying demand–supply dynamics continuing to keep the rupee under pressure.
“While the calendar has changed, volatility is likely to persist. Under Governor Sanjay Malhotra, the RBI appears comfortable allowing the rupee to adjust with market forces, while remaining actively present to smooth excessive moves and maintain orderly conditions,” CR Forex Advisors MD Amit Pabari was quoted as saying by PTI.
Pabari further said that progress toward reviving the paused India–US trade deal remains a key upside risk and could significantly lift confidence if finalised.
In 2025, the Indian currency depreciated by 6%, recording one of the worst declines among Asian currencies this year.
Indian currency outlook 2026
According to Kunal Sodhani, Head of Treasury, Shinhan Bank, as the rupee navigates a more flexible exchange-rate regime, its direction in the coming months will be dictated less by any single domestic variable and more by a confluence of global financial conditions, capital flows and policy responses.
“Foreign portfolio flows will be critical. Equity and debt inflows have historically provided stability to the rupee, while persistent outflows tend to amplify weakness. Any sharp rise in oil prices widens the trade deficit and increases dollar demand, weakening the currency. Conversely, softer energy prices can provide meaningful support by improving the current account balance. Markets will watch closely for signals on how tolerant the RBI remains of currency moves, the scale and timing of its interventions, and the use of instruments such as FX swaps and liquidity operations,” Sodhani said.
On the outlook of the Indian Rupee, he further added that the rupee is likely to remain sensitive to global cues, with intermittent bouts of volatility driven by dollar movements and capital flows.
“Any positive on the US-India tariff front may provide support to the rupee. For the USDINR pair, 88.20-93.80 may remain a broader band for 2026,” he added.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
