Indian Rupee Plummets to Record Lows Amid FII Outflows and Global Risk

The Indian Rupee (INR) slumps to a record low against the US Dollar (USD) at open on Wednesday. The USD/INR jumps to near 91.58 as the Indian Rupee faces intense selling pressure due to consistent outflow of foreign funds from the Indian stock market and the risk-off market mood amid tensions between the United States (US) and the European Union (EU) over Greenland. Foreign Institutional Investors (FIIs) are consistently dumping their stake in the Indian stock market due to the absence of a trade deal announcement between the US and India, keeping demand for US Dollars sustained among Indian importers. So far in January, FIIs have remained net sellers in 12 out of 13 trading days and have offloaded their stake worth Rs. 32,253.55 crore. Consistent outflow of overseas funds from the Indian equity market is weighing heavily on Indian bourses. Nifty50 is down almost 4.3% to near 25,250 from its highest level of 26,373 recorded on January 5. Trade tensions between the US and India were caused by the imposition of 25% punitive tariffs in mid 2025 by Washington on imports from New Delhi for buying Oil from Russia. Going forward, the major trigger for the Indian Rupee will be the announcement of the fiscal budget for the Financial Year (FY) 2026-2027 on February 1. Daily Digest Market Movers: US-EU disputes batter Greenback and US assets The Indian Rupee underperforms the US Dollar, even as the latter has been battered heavily due to ongoing tensions between the US and the EU. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades vulnerably near Tuesday’s closing price around 98.50. The dispute between the world’s largest economies over the future of Greenland has also diminished the appeal of US assets. US markets were down almost 2% on Tuesday after an extended weekend. US-EU relations have been impacted significantly as President Donald Trump has imposed 10% tariffs on several members of the old continent and the United Kingdom (UK) in retaliation for opposing Washington’s plans to hold Greenland’s entitlement. In response, several nations across the globe have criticized Trump’s tariff tactic, warning that it could impact world peace. French President Emmanuel Macron of France has strongly condemned Trump’s use of tariffs for blackmailing the continent to stop opposing Greenland’s purchase by Washington in his speech at the World Economic Forum (WEF) in Davos on Tuesday. “Endless accumulation of new tariffs was unacceptable, particularly when used as leverage against territorial sovereignty,” Macron said, The New York Times (NYT) reported. Meanwhile, market experts have warned that US assets could see further weakness as strained US-EU relations could weigh on exports from the nation, given that US relations are already fragile with other large economies, such as India, China, and Russia. On the domestic front, US Treasury Secretary Scott Bessent announced on Tuesday at the WEF that the White House could announce the name of the new Federal Reserve (Fed) Chairman as early as next week, and there are four candidates for the position presently. Technical Analysis: USD/INR jumps above 91.50 In the daily chart, USD/INR trades at 91.5880. The 20-day EMA at 90.5878 rises and supports the advance, with price holding above this dynamic base. RSI at 71 (overbought) confirms stretched momentum that could curb immediate follow-through. Initial support sits at the rising EMA, and consolidation above this gauge would help stabilize the short-term trend. With the EMA sloping higher, the path of least resistance remains to the upside, and dips toward the average would be treated as a retest of support. A moderation of RSI back below 70 would signal a healthy momentum reset without undermining the bullish bias. Overall, the setup favors continuation while the pair holds above the rising EMA; a clear break below that gauge would open room for a deeper pullback. (The technical analysis of this story was written with the help of an AI tool.)