A woman holds a five-hundred-rupee currency note in the old quarters of Delhi, India, September 25, 2025. REUTERS
MUMBAI, Jan 21 (Reuters) – The Indian rupee fell to an all-time low on Wednesday as risk aversion linked to the Greenland dispute compounded pressures from ongoing capital outflows and the absence of a U.S.–India trade agreement.
The rupee weakened past its prior all-time low of 91.0750 per U.S. dollar set in mid-December, and was last quoting at 91.2950. The currency is down 1.5% so far this month, adding to a near 5% decline in 2025.
Many of the challenges that weighed on the rupee in 2025 remain. Equity outflows persist and importers are more inclined to hedge than exporters amid expectations of further depreciation.
Additionally, forward premium levels are seen as insufficient to price in the extent of the expected depreciation.
While India’s current-account deficit remains manageable, the lack of capital inflows is a hurdle, leaving the currency exposed to further weakness, analysts said.
“The rupee’s biggest challenge is on the capital side,” said Dhiraj Nim, FX strategist at ANZ Bank.
“The central bank seems willing to tolerate a weaker rupee if the move is flow-led, whether from importer hedging or capital outflows. Speculative pressure is what will invite a tougher response.”
EQUITY OUTFLOWS
Portfolio flows remain weak, with foreign investors withdrawing about $3 billion in January after record outflows of $18.9 billion in 2025
“The rupee’s performance continues to reflect structural demand-supply imbalances rather than any deterioration in domestic fundamentals,” India Forex Advisors said in a note, adding that the currency will remain sensitive to corporate demand dynamics and portfolio flows.
An escalation in Greenland-related risk aversion would likely reinforce outflows, increasing downside pressure on the rupee.
Indian equities fell the most in eight months on Tuesday, with foreigners selling more than $300 million of shares.
Meanwhile, the absence of concrete progress on a trade deal has deprived the rupee of a potential inflow catalyst.
The Reserve Bank of India’s approach to the foreign exchange market has remained consistent in recent months. Rather than defending specific levels, the central bank has intervened intermittently to absorb a part of the pressure on the rupee.
Adding to the strain on the currency this year is weakness in most Asian peers — a factor that was largely absent in 2025.
The rupee has, however, tended to chart its own course in recent periods, showing less sensitivity to moves in regional peers, and is performing around the middle of the pack among Asian currencies this month.
Reporting by Nimesh Vora; Editing by Sonia Cheema
