16 December 2025 Punjab Khabarnama Bureau : The Indian rupee weakened further against the U.S. dollar, breaching the psychologically crucial 91-mark during early trade, as persistent global uncertainties, strong dollar demand, and sustained foreign fund outflows weighed heavily on the domestic currency.
Market participants attributed the rupee’s decline to a combination of robust dollar strength, rising U.S. bond yields, and cautious sentiment across emerging markets. The currency opened lower and extended losses through the session, reflecting continued pressure despite intervention expectations.
What Triggered the Rupee’s Fall
Currency traders cited several key factors behind the rupee’s slide:
- Strengthening of the U.S. Dollar Index, driven by expectations of higher interest rates remaining for longer
- Foreign Institutional Investors (FIIs) continuing to pull money out of Indian equities
- Higher crude oil prices, increasing India’s import bill
- Risk-off sentiment in global markets due to geopolitical and economic concerns
The rupee’s movement past the 91-level is seen as a significant technical breach, increasing volatility in currency markets.
Global Factors at Play
Globally, the U.S. dollar remained firm against major currencies as investors sought safety amid uncertain growth outlooks. Expectations of prolonged tight monetary policy in the United States have supported the greenback, putting pressure on emerging market currencies, including the rupee.
Additionally, concerns over global inflation, slowing growth in major economies, and ongoing geopolitical tensions have reduced risk appetite, leading to capital flows away from developing markets.
Impact of FII Outflows
Foreign investors have been net sellers in Indian equity markets in recent sessions. Analysts note that continued capital outflows exert downward pressure on the rupee, as demand for dollars rises to repatriate funds.
The selling pressure has been particularly visible in banking, IT, and metal stocks, further denting market sentiment.
Crude Oil Prices Add Pressure
Rising crude oil prices have also played a role in weakening the rupee. As India imports a significant portion of its energy requirements, higher oil prices lead to increased dollar demand by oil marketing companies, putting additional strain on the local currency.
Economists warn that sustained high crude prices could widen the current account deficit, further impacting the rupee’s stability.
Role of the Reserve Bank of India
Market participants are closely watching the Reserve Bank of India (RBI) for signs of intervention. While the central bank typically steps in to curb excessive volatility, experts believe it allows gradual depreciation as long as movements remain orderly.
The RBI’s substantial foreign exchange reserves provide a buffer, helping prevent sharp or disorderly movements in the currency.
Impact on Markets and Economy
A weaker rupee has mixed implications for the economy:
Positive impacts:
- Export-oriented sectors such as IT and pharmaceuticals may benefit
- Overseas earnings translate into higher rupee revenues
Negative impacts:
- Higher import costs, especially for fuel and electronics
- Increased inflationary pressures
- Higher external debt servicing costs
Stock markets reacted cautiously, with export-heavy stocks gaining modestly while broader indices remained under pressure.
Expert Views
Currency experts believe the rupee may remain under pressure in the near term unless global conditions improve. Analysts suggest the currency could trade in a volatile range, with movements influenced by U.S. economic data, global interest rate expectations, and domestic macroeconomic indicators.
Some economists also pointed out that while breaching the 91-mark is significant, the broader fundamentals of the Indian economy remain relatively stable compared to other emerging markets.
Outlook Ahead
Looking forward, key factors that will determine the rupee’s trajectory include:
- U.S. inflation and interest rate signals
- Trends in crude oil prices
- FII investment patterns
- RBI’s policy stance and intervention strategy
Any easing of global uncertainty or improvement in risk appetite could offer support to the rupee, while continued dollar strength may keep pressure intact.
Conclusion
The rupee’s fall past the 91-mark against the U.S. dollar highlights mounting global and domestic pressures on the currency. While near-term volatility is expected, strong economic fundamentals and RBI support may help prevent sharp depreciation in the longer run.
Summary
The Indian rupee weakened beyond the 91-mark against the U.S. dollar amid strong dollar demand, FII outflows, rising crude prices, and global uncertainty, raising concerns over near-term currency volatility.