Indian rupee kicks off 2026 weaker on corporate dollar demand

MUMBAI: The Indian rupee welcomed 2026 with a marginal decline, weighed down by dollar demand from corporates, while thin volumes in the first trading of the New Year curbed any major movements, according to traders.

The rupee opened lower at 89.9525 per U.S. dollar on Thursday, against Wednesday’s close of 89.87. The currency moved in a narrow range before settling 0.1% down at 89.97.

The rupee closed 2025 marking with a 4.72% decline for the year, its worst showing since 2022, when it dropped nearly 10%.

Trading volumes were subdued due to New Year holidays in major markets, leaving routine flows as the primary driver for price action and Thursday’s move reflects the broader pattern seen through much of 2025, where underlying demand–supply dynamics kept the rupee under pressure.

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“Until the 90 level is not broken, it is difficult to guess any firm direction for the currency,” trader with a brokerage said.

“The rupee enters 2026 with both challenges and cushions. While global uncertainty persists, India’s strong macro base, ample reserves, and pragmatic policy framework provide stability,” said Amit Pabari, managing director at FX advisory firm CR Forex.

Progress on a pending India–U.S. trade deal remains a potential upside catalyst and could deliver a meaningful confidence boost if concluded, according to Pabari. The rupee is expected to trade in 89.30–90.20 range in the near term, with a mild bias toward strengthening he added.

Over the near term market participants are monitoring equity flows to assess whether the year shapes up differently from 2025, when foreign investors pulled out record amounts from the local stock market.

An improvement in equity flows would be key to alleviating dollar demand–supply pressures that hurt the rupee in 2025, traders said.