The Indian rupee fell to 96.43 against the US dollar on Tuesday. It was the weakest level in more than two months. The rupee had also fallen last week as foreign investors sold Indian assets. The latest drop has brought the currency closer to its record low of 96.96, seen in May, 2026. The fall has also raised fresh expectations that the Reserve Bank of India may step in to support the rupee.
The RBI has already been selling dollars in the market to slow the rupee’s fall. These sales help meet the strong demand for dollars, but traders opine the fall will continue. The pressure is coming mainly from foreign money leaving Indian markets. Analysts also expect the rupee to weaken further over the next year.
The central bank has a large pool of foreign exchange reserves. It has also used currency swaps to manage dollar flows. Regarding this DBS stated, “While the FX intervention response has been strong, the central bank will prefer to time dollar sales to rationalise the use of the reserves buffer and prevent widening the ballooned short FX forward book.”
Selling dollars can ease pressure for now, but using reserves too quickly could leave less room for action later.
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The rupee’s next move will depend heavily on foreign investment flows. If overseas investors continue to pull money from Indian assets, demand for dollars could stay high. The RBI can slow the fall, but it may not be able to stop the trend on its own. For investors, the focus is now shifting from the rupee’s daily moves to how much support the central bank is willing to provide.
The key test will be whether foreign selling eases. If it does not, the RBI may have to balance support for the rupee with the need to preserve its dollar reserves.