Geopolitics, FPI outflows push rupee to record low of 91.75 per dollar

The Indian rupee slipped to an all-time low of 91.75 against the US dollar on January 21, marking its sharpest intraday fall in nearly two months.

The currency recovered slightly on January 22, gaining 15 paise to trade around 91.50 per dollar in early deals.

Market experts attribute the rupee’s weakness to a mix of geopolitical uncertainty, foreign portfolio investor (FPI) withdrawals, and domestic dollar demand.

Global concerns intensified after US President Donald Trump’s remarks on Greenland, including threats of tariffs against several European countries. Although Trump has since reversed the proposed tariffs on eight European nations, the episode added to global risk aversion and market volatility.

However, analysts suggest the rupee’s fall is not entirely driven by global factors.

Mitul Kotecha, Head of Forex and Emerging Markets Macro Strategy for Asia at Barclays, told CNBC TV18 that the rupee’s decline appears “idiosyncratic”, reflecting domestic pressures rather than a broader emerging-market selloff. He noted that strong dollar demand pushed USD-INR sharply higher.

Ritesh Bhansali, Deputy CEO of Mecklai Financial Services, told Mint that rising geopolitical risks, tariff threats, and fears of a renewed trade war have hurt investor sentiment. “When uncertainty rises, FPIs tend to withdraw from emerging markets like India, and that has put direct pressure on the rupee,” he said.

Data from the Reserve Bank of India (RBI) shows sustained capital outflows. Net foreign direct investment (FDI) recorded an outflow of $446 million in November, following outflows of $1.67 billion in October and $1.66 billion in September. August had seen a modest net inflow of $215 million.

FPIs have already withdrawn $3.36 billion in 2026 on a net basis, after pulling out $18.91 billion in 2025, adding to pressure on the currency.

Looking ahead, Dhiraj Nim, Forex Strategist at ANZ, warned of further downside risks. He said USD-INR could move higher from current levels, with 92 to 92.50 emerging as a key resistance range in the near term.

Overall, while global events have contributed to volatility, analysts say persistent capital outflows and domestic dollar demand remain the primary drivers behind the rupee’s recent slide.