Rupee Tests 91 per Dollar Again as FII Outflows and Equity Weakness Drive Dollar Demand
Persistent foreign fund outflows and early equity market losses kept the rupee under pressure in morning trade, with the currency hovering close to the psychologically important 91-per-dollar level.
The rupee edged lower in early Friday trade, slipping 4 paise to 90.95 against the US dollar, as steady dollar demand and continued foreign portfolio outflows weighed on sentiment. The currency opened at 90.91 in the interbank foreign exchange market and gradually weakened during the morning session, indicating sustained demand for dollars rather than a sudden spike in volatility.
The rupee had ended the previous session unchanged at 90.91, but traders said underlying pressure remained visible as the currency struggled to strengthen despite relatively stable global conditions. Dealers noted that the rupee has repeatedly drifted toward the 91-per-dollar mark, highlighting persistent structural demand for dollars in the domestic market.
Unlike sharp currency moves triggered by global shocks, the current weakness appears to reflect steady capital outflows and importer demand, which have kept the rupee biased toward gradual depreciation.
Foreign Fund Outflows Remain a Key Driver
Foreign portfolio investor outflows continued to weigh on the rupee, with overseas investors selling equities worth ₹3,465 crore in the previous session, according to exchange data. Currency dealers said equity outflows typically translate into higher demand for dollars as foreign investors repatriate funds.
Domestic equities traded lower in early deals, reinforcing the negative tone in currency markets. The Sensex fell more than 350 points, while the Nifty declined over 100 points, suggesting broad-based risk reduction across sectors. Traders noted that weakness in equities and the rupee often reinforce each other, particularly during phases of foreign investor selling.
Market participants said the absence of strong foreign inflows has left the rupee vulnerable to even moderate dollar demand, especially when domestic markets are under pressure.
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Softer Dollar and Crude Prices Limit Rupee Losses
Despite the underlying weakness, supportive global factors helped limit the rupee’s decline. The dollar index, which tracks the US currency against a basket of major currencies, was trading slightly lower at 97.70, indicating mild weakness in the greenback.
Lower crude oil prices also provided a stabilising influence. Brent crude hovered near $70.70 per barrel, remaining below recent peaks and easing pressure on India’s import bill. Because India relies heavily on imported energy, stable or declining oil prices typically help contain rupee depreciation by reducing demand for dollars from oil marketing companies.
Forex traders said that without the combination of a softer dollar and stable crude prices, the rupee could have weakened more sharply during the session.
Rupee Continues to Lag Other Asian Currencies
Currency dealers noted that the rupee has shown relatively limited gains compared with other Asian currencies in recent sessions, even when the dollar index weakened. This pattern reflects persistent domestic dollar demand and intermittent capital outflows, which have prevented the rupee from fully benefiting from favourable global currency movements.
Treasury market participants said steady dollar buying during the previous session pushed the rupee from around 90.80 to 90.91, highlighting consistent demand from importers and institutional participants. The currency’s tendency to weaken quickly during phases of dollar strength, while showing only modest recovery when the dollar weakens, has reinforced expectations of a gradual depreciation trend.
Traders said this asymmetric behaviour suggests that the rupee remains structurally offered near recent levels.
Key Trading Range Remains in Focus
Currency traders said the rupee continues to trade within a relatively narrow band, with the 90.80–91.00 range acting as an important near-term zone. Repeated tests of the upper end of this range indicate persistent depreciation pressure even in the absence of major global triggers.
A sustained move above 91 per dollar could signal stronger downside momentum and potentially trigger additional hedging demand from importers. On the other hand, a recovery below 90.80 would likely require either renewed foreign inflows or a sharper decline in the dollar index.
For now, traders expect the rupee to remain range-bound with a mild depreciation bias, closely tracking foreign investment flows and domestic market sentiment.
What the Rupee’s Weakness Signals for Markets
Friday’s modest decline suggests that currency markets remain orderly, with no signs of abrupt capital flight or stress-driven positioning. Instead, the rupee’s movement reflects a steady adjustment to ongoing foreign outflows and moderate dollar demand.
For equity markets, persistent rupee weakness can influence foreign investor sentiment and increase sensitivity to global risk factors. Import-dependent sectors such as oil marketing companies, aviation and chemicals remain particularly sensitive to currency movements, while exporters typically benefit from a weaker rupee.
Traders said the rupee’s behaviour near the 91-per-dollar level will be closely watched in coming sessions, as a decisive break could influence both currency positioning and broader market sentiment.
