Rupee hits all-time low of 91.74 vs dollar: What’s driving the fall

The Indian rupee weakened sharply in intra-day trade on Wednesday (January 21), falling 77 paise to a fresh all-time low of 91.74 against the US dollar, as sustained foreign fund outflows and strong dollar demand weighed heavily on the currency.

The rupee opened at 91.05 at the interbank foreign exchange and extended losses through the session, slipping past its previous lifetime low of 91.14 recorded in mid-December.

On Tuesday, the currency had closed 7 paise lower at 90.97.

Global tensions and domestic weakness pressure sentiment

Forex market participants pointed to heightened geopolitical tensions in Europe, particularly around the Greenland issue and potential tariff actions, as a key factor driving risk aversion. The negative tone in domestic equity markets further undermined sentiment toward the rupee, traders said.

Outflows and importer demand add to strain

Persistent selling by foreign institutional investors continued to limit dollar inflows, while robust demand for the greenback from metal importers added to pressure in the local foreign exchange market. Exchange data showed foreign investors sold equities worth ₹2,938.33 crore on Tuesday.

ANZ flags further downside risk

According to ANZ, the rupee remains in uncharted territory and retains a bias to weaken further. The bank said levels of 92.5–93 could be within reach if current pressures persist, noting that ongoing equity outflows are a key drag on the currency. ANZ added that the Reserve Bank of India appears tolerant of rupee weakness, as the move is driven by global and structural factors rather than speculative positioning.

Investor confidence and volatility concerns

Sachin Sawrikar, Founder and Managing Partner at Artha Bharat Investment Managers, said elevated currency volatility continues to weigh on foreign investment decisions. “While India’s long-term growth outlook remains strong, sharp currency swings erode returns when repatriated, reducing India’s competitiveness relative to other emerging markets,” he said.

Sawrikar added that higher hedging costs are compressing returns for long-term investors, while short-term investors face increased risks of abrupt capital movements, underscoring the importance of policy credibility during periods of global uncertainty.

Broader market cues

The dollar index was marginally lower at 98.61, while Brent crude futures fell 1.88% to $63.70 per barrel.

-With PTI inputs