Why Is Rupee Falling Against Dollar? Indian Currency Breaches 91-Mark Amid FII Outflows

Why is rupee falling against dollar has emerged as a key question in India’s financial markets after the domestic currency breached the psychologically important 91-mark against the U.S. dollar. The sharp decline comes amid sustained foreign fund outflows, uncertainty over the India–US trade deal, and weak domestic macroeconomic cues.

The Indian rupee slipped sharply on Tuesday, breaching the 91-mark against the U.S. dollar for the first time during intra-day trade. At around 11:45 am, the rupee was trading at 91.14 per dollar, down 36 paise from its previous close, marking a new record low.

The continued slide answers, at least partially, why is rupee falling against dollar over the past few sessions. The currency has weakened from 90 to 91 in just 10 trading sessions, losing nearly 1% in the last five sessions alone.

At the interbank foreign exchange market, the rupee opened at 90.87 and steadily declined as the session progressed. On Monday, it had already settled at an all-time low of 90.78, registering a loss of 29 paise.

Market experts attribute the fall largely to persistent Foreign Institutional Investor (FII) outflows and uncertainty surrounding the India–US trade agreement. FIIs sold equities worth ₹1,468.32 crore on Monday, according to exchange data, adding pressure on the domestic currency.

Why Is Rupee Falling Against Dollar? Key Reasons Explained

Several global and domestic factors are contributing to the weakening of the rupee:

FII Outflows and Trade Deal Uncertainty

According to Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, lack of clarity on the India–US trade deal has clouded sentiment in the currency market. Despite indications that the first phase of the agreement may be signed by year-end, uncertainty continues to fuel daily dollar buying.

Weak Inflation Data

Wholesale Price Index (WPI)-based inflation remained in negative territory for the second consecutive month in November at (-)0.32%, following (-)1.21% in October. While food prices showed a mild monthly increase, the broader deflationary trend limited support for the rupee.

Equity Market Weakness

Domestic equity benchmarks also reflected investor caution. The Sensex fell 363.92 points to 84,849.44, while the Nifty declined 106.65 points to 25,920.65 in early trade, further weighing on the currency.

Global Factors Adding Pressure

The dollar index was marginally lower at 98.27, but remained firm overall.
Brent crude prices eased 0.61% to $60.19 per barrel, offering limited relief to import costs but not enough to reverse rupee weakness.

Conclusion

In summary, why is rupee falling against dollar can be linked to a combination of sustained FII selling, uncertainty over trade negotiations, weak inflation data, and cautious equity market sentiment. Unless capital inflows improve or clarity emerges on key trade and policy fronts, volatility in the USD/INR pair is likely to persist.