Rupee Breaches 91 Per Dollar as FPIs Sell ₹29,300 Crore

On Tuesday, January 20th, the Indian rupee opened at 90.93 against the dollar and quickly fell to 91.01 due to a combination of heavy selling by foreign portfolio investors (FPI) and increased global trade tension. FPIs have sold off ₹2,9300 crore worth of equities, putting pressure on the rupee. This selling has resulted in a major flight toward safe havens (such as gold and U.S. Treasury Bills), and thus the rupee is one of the weakest currencies in Asia.
The rupee's decline is caused by both internal and external factors. There are fears of an economic slowdown in India, combined with the impact of various geopolitical events occurring internationally.

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Global Tensions Weigh on Markets

U.S President Trump's recent threats of levying tariffs against European countries due to their involvement with Greenland have caused a large-scale risk-off reaction globally and an increase in demand for U.S. dollars, causing the dollar index to strengthen.
On the other side, there has been a solid flow of financing into the U.S. equity markets as a result of continued strong U.S. labour market data and the expected length of time that Federal Reserve interest rates remain at their current level. The increased demand for gold and silver as a safe haven reflects the uncertainty existing within the global financial markets.
As a result of these factors, the rupee and other emerging-market currencies continue to be under pressure.

Domestic Pressures from FPI Outflows

Continuous sales by Foreign Portfolio Investors (FPIs) of shares, as well as sporadic intervention by the Reserve Bank of India (RBI) to respond to global events, have contributed to weaker prices in the Indian currency. In December, the rupee passed through the 90 level to the downside, resulting from large negative capital flows experienced last year.

Traders have their sights set on the possibility of the rupee moving to the 91.70-92.00 level in the absence of any supportive action by the RBI, with 90.30-90.50 providing some support.