Rupee sinks to two-month low amid FPI selling and rising US yields
On Thursday, the Indian rupee declined to a two-month low against the US dollar due to foreign portfolio outflows. Overseas investors sold off investments amid rising US bond yields and dollar demand. The rupee surpassed the 96-level twice in three days, indicating intense market pressure. Custodian banks continued purchasing dollars, which also pointed to ongoing foreign outflows.
On Thursday, the Indian rupee plummeted to a two-month low of 96.3150 against the US dollar, reflecting the decline in major Asian currencies. This sharp fall occurred amidst a risk-off strategy adopted by overseas portfolio investors, who were selling their investments in Indian equities and debt following a surge in US bond yields.
The rupee had previously closed at 95.83 a dollar on the previous session, and breached the psychologically significant 96-level on two consecutive days. Thursday's trade marked the steepest single-day drop in over two months, driven by high demand for the US dollar, despite the Reserve Bank of India intervening to curb the losses.
Analysts attributed the rupee's weakness to a confluence of factors, including the US dollar's ongoing rise, fueled by higher US bond yields and a rebound in crude oil prices. Dilip Parmar, an analyst with HDFC Securities, explained that risk-averse sentiment, persistent foreign fund outflows, dollar short covering by market participants, and the central bank's substantial forward short-dollar position continued to weigh on the currency.
Moreover, traders noted that custodian banks were actively purchasing dollars, indicating ongoing foreign portfolio outflows. High dollar demand from importers also contributed to the downward pressure on the rupee.
Data from NSDL revealed that $991 million, or Rs 9508 crore, flowed out of local markets on Thursday, a sign of continued outflows by foreign institutional investors. In 2026 alone, FPIs withdrew investments worth $23 billion, or Rs 2.15 lakh crore. The rupee started the day at a weaker level of 95.96 a dollar but soon weakened further, closing at 96.3150. This currency depreciation mirrored the significant fall in the BSE Sensex, which lost 570 points on the same day.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
