USD vs INR: Rupee hits record low against US dollar—Why is it falling?

USD vs INR: The rupee slipped to a record low against the US dollar on Wednesday. It depreciated 52 paise to trade at 91.50 against the greenback in early trade.

On Tuesday, the rupee had already ended 6 paise lower at 90.98 per dollar. This was its weakest closing level since December 16, highlighting sustained pressure on the currency.

Market participants said strong dollar demand from metal importers weighed on the rupee. Continued foreign portfolio investor (FPI) outflows and selling pressure in domestic equity markets also dented sentiment.

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Why the rupee is falling

The rupee is falling due to a combination of domestic and global factors. Heavy demand for dollars by importers, particularly in the metals sector, is pushing the currency lower. At the same time, FPIs are reducing their exposure to Indian equities, leading to higher dollar outflows. Rising crude oil prices are adding to the pressure, as India’s oil imports become costlier. Globally, trade tensions, geopolitical risks, and volatility in the dollar index are creating uncertainty, further weakening the rupee.

Crude oil near $64

Crude oil prices remained flat near $64 a barrel. While prices were stable, geopolitical tensions continued to keep energy markets cautious. Higher crude prices tend to increase India’s import bill and put pressure on the rupee.

Dollar index sees sharp volatility

Manoj Kumar Jain said the dollar index remained highly volatile in a turbulent global session. The dollar index settled at 98.37 on Tuesday, down 0.50 per cent.

The fall in the dollar index came amid rising trade war concerns between the US and European countries. Aggressive tariff threats by the US and the possibility of retaliatory tariffs from Europe increased uncertainty in global financial markets.

The dollar index also plunged amid heavy selling in US equity markets. However, gains in US 10-year bond yields helped the dollar find support at lower levels.

Jain expects the dollar index to remain volatile this week. He sees it trading in a wide range of 97.70 to 100.80 amid ongoing geopolitical tensions and financial market volatility.

Rupee outlook remains weak

On the domestic front, the rupee extended its fall and slipped to a one-month low. Jain said continued sell-off in Indian equities and sustained FPI outflows are pushing the rupee lower.

He added that rising crude oil prices are also pressuring the currency. However, the proposed India–EU free trade agreement could provide some support to the rupee at lower levels.

Jain expects the rupee to remain volatile this week. The USD-INR pair is likely to trade in the range of 89.85 to 92.00 amid swings in the dollar index, domestic equity markets, and geopolitical developments.

Technical view on USD-INR

From a technical perspective, Jain said the USD-INR January 28 futures contract extended its gains. The contract settled slightly higher at 91.0050 on Tuesday, up 0.02 per cent on the National Stock Exchange.

On the daily chart, the pair is trading above its moving average trend-line support of 90.42. The relative strength index (RSI) is holding above 60 levels, indicating bullish momentum.

The MACD is also showing a positive crossover on the daily chart. Support for the pair is seen in the range of 90.74 to 90.45, while resistance is placed between 91.35 and 91.55.

Jain said the pair is sustaining above the 90 mark and is expected to trade in the broader range of 89.85 to 92.00 this week.