Rupee falls to new low of 91.58 against dollar

MUMBAI: The rupee fell to a new low of 91.58 on Wednesday, compared with Tuesday’s close of 90.98, as geopolitical tensions triggered stop-loss dollar purchases, leading to a very sharp fall in the currency.

KN Dey, a forex consultant, said the decline reflected a mix of market mechanics and global developments. “The rupee is under sustained pressure, and the move today reflects a combination of technical, flow-driven, and geopolitical factors,” he said. “The immediate trigger was the activation of stop-losses once key levels were breached. That accelerated the move.” He added that portfolio flows continued to weigh on the currency, noting, “At the same time, equity flows have remained persistently negative. Foreign investors have been net sellers on most days this month, and the cumulative outflow has been significant. Demand for dollars is high, and while the Reserve Bank of India is supplying dollars intermittently, the pressure has not eased.”

Dey said global risk sentiment had weakened sharply amid rising geopolitical tensions, which had unsettled markets and slowed capital inflows into emerging economies, including India. He noted the absence of any verbal intervention from policymakers, which in the past had helped calm markets even without direct action.
While the Reserve Bank of India has been intervening frequently to smooth volatility such measures alone have been insufficient to reverse sentiment. Over the past year, the rupee has depreciated by more than 5%, sliding from around 86.50 when the current US administration began its term to about 91.40 now.

While markets are also watching the upcoming Budget for positive triggers, expectations remain muted. It is uncertain whether the Budget will be strong enough to restore confidence among foreign investors or stem capital outflows. Trade-related risks persist as well, given India’s exposure to Iran through energy imports and strategic projects, which could be affected by any fresh tariffs or sanctions.

In past episodes of stress, authorities had relied on decisive measures to shore up confidence, citing instruments such as the FCNR swap in 2013 and earlier bond issuances during previous crises. Dey said similar steps might now be needed to mobilise $25–30 billion to stabilise the market.

While India’s current account deficit remains manageable and is partly cushioned by services exports, the strain is evident on the capital account. Equity outflows have been large, FDI inflows remain weak, and external commercial borrowings are becoming harder to manage, particularly for public sector entities. Capital inflows are largely limited to FDI, portfolio flows, NRI deposits and ECBs, all of which are currently under pressure.