Rupee entered 2026 on a weak note, slipping 11 paise to 89.99 against the US dollar in early trade on Thursday. This comes as persistent pressure from foreign fund outflows and trade-related uncertainty continue to cloud sentiment in the currency market. The currency fell sharply in 2025, losing nearly 5% since it crossed the 85-per-dollar level in January and moving past the earlier record low of 91 against the greenback. Over the same period, the rupee has shed more than 19% against the euro, about 14% versus the British pound and over 5% against the Japanese yen, making it the weakest performer among Asian currencies. This decline has unfolded even as the dollar index dropped more than 10% and crude oil prices stayed soft globally. Pressure on rupee intensified after reciprocal tariffs announced by US President Donald Trump in April triggered sustained foreign portfolio selling, with investors reallocating funds to other emerging markets seen as offering better risk-adjusted returns.According to official data, cited by PTI, foreign direct investment on a net basis between January and October turned negative, while overall investment inflows declined to minus $0.010 billion, compared with inflows of $23 billion in the same period last year.

Net FDI stood at $6.567 billion, while net portfolio investment remained negative at minus $6.575 billion. “FDI acts as the anchor flow for the balance of payments. When that anchor weakens, the currency becomes more dependent on portfolio flows; forex markets turn more sensitive to global risk sentiment; and central bank intervention requirements increase,” said Anindya Banerjee, head of currency and commodity research at Kotak Securities, PTI quoted. The rupee’s losses accelerated towards the end of the year. It fell more than 1% in a single session on November 21 to 89.66 per dollar, slipped past the 90 mark on December 2 and breached 91 on December 16.