The Reserve Bank of India (RBI) should not let the “psychology of ₹100 per dollar” prevent it from letting the exchange rate fall beyond that limit, chairman of the Sixteenth Finance Commission Arvind Panagariya said on Thursday (May 21, 2026).

“Dear @RBI: Do not let the psychology of Rs 100 per dollar determine your policy response. 100 is just a number, like 99 and 101. Whether the oil shortage is short-lived or long-lived, the right response at this moment is to let the rupee depreciate,” Mr. Panagariya posted on the social media platform X. 

This comes at a time when the rupee nearly touched ₹97 to a dollar in the intraday trade on Thursday (May 21, 2026), with traders saying the RBI intervened to prevent it from crossing that limit. 

Mr. Panagariya argued that, in the case of the oil shortage being short-lived, the rupee will depreciate now but will “substantially recover” once the oil import bill shrinks and foreign capital seeks Indian investments precisely to take advantage of the cheaper rupee. 

If the oil shortage lasts longer than a year, he said that resorting to “anything other than depreciation will be a losing proposition”, adding that trying to defend the rupee will “continue to bleed the reserves until they are exhausted”.

“Nor would the dollar-denominated bonds or high-interest dollar-denominated NRI deposits turn out to be more than a band-aid,” Mr. Panagariya added, presumably referring to news reports that the RBI was considering these options to protect the rupee. “Eventually, you will have to cross the 100-rupee-per-dollar psychological barrier.”

He added that dollar-denominated bonds and high-interest NRI dollar deposits are “costly instruments that pay significantly higher interest” than the rate India earns on its own foreign-currency reserves. 

“It is largely a transfer to rich NRIs,” Mr. Panagariya said. 

“This is not 2013: Inflation was in the double digits in 2013. Thanks to your [the RBI’s] prudent monetary management, that is not the case now. Therefore, the economy is well-positioned to absorb some inflationary pressure that will accompany the depreciation,” he said. 

The rupee tumbled for the third straight session and lost 50 paise to settle near its lowest level at 90.84 (provisional) against the U.S. dollar on Friday (January 16, 2026), amid rising crude oil prices and sustained outflow of foreign funds.

Volatile global sentiment and a firm American currency accelerated the withdrawal of foreign institutional investors, even as domestic investors resorted to value buying, forex traders said.

According to traders rupee faced pressure after data released on Thursday (January 15, 2026) showed India’s trade deficit widened slightly to $25.04 billion in December 2025, compared to $24.53 billion in November and $22 billion in December 2024.

At the interbank foreign exchange, the rupee opened at 90.37 and touched an intraday low of 90.89, a tad above its lowest-ever closing level. It ended the session at 90.84 (provisional) against the greenback, down 50 paise from Wednesday’s (January 14, 2026) close.

The rupee declined by 11 paise to close at 90.34 against the U.S. dollar on Wednesday (January 14, 2026), after falling 6 paise on Tuesday (January 13, 2026).

The domestic foreign exchange market was closed on Thursday (January 15, 2026) due to the Mumbai municipal corporation elections.

The Indian currency recorded its lowest closing level of 90.93 on December 16, when it also saw its lifetime low of 91.14 in intraday trade.

Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said the rupee fell for the third consecutive session amid persistent foreign fund outflows and a strong dollar overnight.

He said the dollar strengthened after better-than-expected U.S. unemployment claims and manufacturing data.

“We expect the rupee to trade with a negative bias on uncertainty over trade deal talks and geopolitical tensions. A strong dollar, FII outflows from capital markets and elevated crude oil prices may pressurise the rupee,” Mr. Choudhary said and projected the USD-INR spot price to trade “in a range of 90.50 to 91.25”.

Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, was trading 0.06% lower at 99.26.

Brent crude, the global oil benchmark, was trading 1.14% higher at $64.49 per barrel in futures trade.

On the domestic equity market front, the Sensex climbed 187.64 points to settle at 83,570.35, while the Nifty rose 28.75 points to 25,694.35.

Foreign institutional investors offloaded equities worth ₹4,781.24 crore on Wednesday (January 14, 2026), according to exchange data.

The rupee depreciated 5 paise to ₹90.23 against the U.S. dollar in early trade on Monday (January 12, 2026), driven by rising crude oil prices and an unabated outflow of foreign funds.

According to forex traders, a volatile geopolitical situation and concerns over further U.S. tariffs on Indian exports fuelled the selling of Indian stocks by foreign institutional investors, even as traders awaited cues from macroeconomic data to be released this week.

At the interbank foreign exchange, the rupee opened at ₹90.23 and stayed weaker by 5 paise from its previous closing level.

On Friday (January 9, 2026), the rupee fell 28 paise to close at ₹90.18 against the U.S. dollar.

Meanwhile, the dollar index, which measures the strength of the greenback against a basket of six currencies, was trading 0.14 per cent lower at ₹98.75.

Brent crude, the global oil benchmark, was trading 0.13% higher at $63.44 per barrel in futures trade.

On the domestic equity market front, the 30-share benchmark index Sensex declined 356.49 points or 0.43% to 83,219.75, while the Nifty dipped 94.90 points or 0.37% to 25,588.40.

Analysts said several factors like the development related to Venezuela, Iran and US President Donald Trump’s possible move towards Greenland are influencing the sentiment worldwide.

Foreign institutional investors offloaded equities worth ₹3,769.31 crore on Friday (January 9, 2026), according to exchange data.

The latest weekly data released by the Reserve Bank of India (RBI) on Friday (January 9) showed India’s forex reserves dropped by $9.809 billion to $686.801 billion in the week to January 2. In the previous reporting week, the forex reserves had jumped by USD 3.293 billion to $696.61 billion.

Foreign portfolio investors have started 2026 on a cautious note, extending their selling streak from last year by withdrawing ₹7,608 crore ($846 million) from Indian equities in the first two trading sessions of January.

The withdrawal of funds followed the largest outflow of ₹1.66 lakh crore ($18.9 billion) recorded in 2025, triggered by volatile currency movements, global trade tensions and concerns over potential U.S. tariffs, and stretched market valuations.

Also Read I Rupee plunges 5% in 2025 amid persistent foreign fund outflows, dollar strength

This sustained selling pressure by foreign portfolio investors (FPIs) has significantly contributed to the nearly 5% depreciation of the rupee against the dollar during 2025.

However, market experts believe the tide could turn in 2026.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, said the year is likely to witness a shift in FPI strategy, as improving domestic fundamentals may start attracting net foreign inflows.

A robust GDP growth and the prospects of a recovery in corporate earnings bode well for positive FPI flows in the coming months, he added.

Echoing similar views, Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said normalisation in India-U.S. trade relations, a benign global interest rate environment and stability in the USD-INR pair could create a favourable backdrop for foreign investors.

He noted that equity valuations have become relatively comforting compared to last year, which could further support a revival in inflows.

Despite these positive expectations, FPIs have begun 2026 on a cautious note, and according to data from NSDL, they pulled out nearly ₹7,608 crore from Indian equities between January 1 and 2.

This trend is not unusual, as foreign investors have historically remained guarded in January, having withdrawn funds in eight out of the past ten years, Mr. Khan said.

Consequently, FPI flows are likely to remain highly sensitive to global cues and macroeconomic developments. While high valuations were a key concern over the past year, that pressure appears to have eased for now, offering some room for optimism going ahead, he added.

The rupee opened the month with a fresh low of ₹89.7 a dollar and is expected to maintain this level till December 2025, according to experts.

This is the fourth consecutive session in which the rupee has depreciated against the dollar. A delayed U.S.-India trade deal, non-intervention from the RBI and a widening trade deficit are the reasons behind the depreciation, according to Dilip Parmar, Senior Research Analyst at HDFC Securities.

The rupee has been on a declining trend since May 2025, and it hit a fresh low at the end of August at a little more than ₹88 per dollar. After this, analysts forecast that if the central bank did not step in at ₹89 a dollar, it would go as high as ₹90 a dollar.

In November 2025, the rupee was down 0.8% while the dollar was also depreciating, marking a “puzzling” trend, Aditi Gupta, Economist at BoB research, wrote. “Annualised daily volatility was just 1.4% in the first half but increased to 4.9% in the second half,” Ms. Gupta said.

While the widening trade deficit is cited as a factor, she said that the depreciation this time was more a result of the sentiments of traders in the backdrop of uncertainty surrounding the U.S.-India trade deal. “Receding FPI interest in Indian equities has also added to the depreciating currency,” she added.

If the uncertainty continues, the rupee will stay at ₹89 to ₹90 a dollar, the experts concluded.

The rupee stayed on the recovery path and gained 11 paise to 89.05 against the U.S. dollar in early trade on Tuesday (November 25, 2025), supported by lower crude oil prices in the international market.

The Indian currency, however, remained under pressure due to a strong greenback, subdued stock market sentiment and withdrawal of foreign capital, Forex analysts said.

At the interbank foreign exchange market, the rupee opened at 89.02 and then traded at 89.05 against the greenback in initial deals, up 11 paise from its previous closing level.

The rupee settled sharply higher by 50 paise at 89.16 against the greenback on Monday (November 24, 2025), a day after crashing 98 paise to touch its lifetime low of 89.66 against the U.S. dollar on Friday (November 21, 2025).

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was higher by 0.06% at 100.13.

Brent crude, the global oil benchmark, declined 0.33% to $63.16 per barrel in futures trade.

On the domestic equity market front, the Sensex declined 46.99 points to 84,853.72 in early trade while Nifty slipped 10.35 points to 25,949.15.

Foreign institutional investors (FIIs) sold equities worth ₹4,171.75 crore on a net basis on Monday (November 24, 2025), according to exchange data.

Reserve Bank governor Sanjay Malhotra on Thursday (November 20, 2025) said the central bank does not target any level of Rupee, and the recent depreciation of the domestic currency against the U.S. dollar is owing to demand for the greenback.

The governor also said the Reserve Bank has “very good” buffers of foreign exchange reserves, and there is no need for concern on the external sector.

Delivering the VKRV Rao Memorial Lecture at the Delhi School of Economics, Mr. Malhotra also said the foremost priority of the RBI is to ensure financial stability in the system, and the Central bank is trying to simplify regulations, where possible, while maintaining necessary safeguards and guardrails.

Replying to a question on depreciation of the Rupee against the dollar, he exuded confidence that India will have a “good trade deal” with the US, and that would relieve the pressure on the country’s current account balance.

He said the recent depreciation of the Indian Rupee is trade-related and owing to U.S. tariff issues.

“We do not target any level. Why is the Rupee depreciating? [It] is because of the demand…It’s a financial instrument, and there is a demand for dollars, and if the demand for dollars goes up, the Rupee depreciates; if the demand for Rupee goes up, dollar comes down, then it appreciates,” Mr. Malhotra said.

The Rupee depreciated 23 paise to close at 88.71 (provisional) against the U.S. dollar on Thursday (November 20, 2025), on broad strength of the American currency and fading odds of a rate cut by the U.S. Federal Reserve.

Forex traders said the dollar has staged a rally, moving above the 100 level, after the U.S. Federal Reserve minutes indicated that most officials were opposed to a rate cut in December, following the October cut.

Responding to another query on the banking sector, the governor said the way Indian banks are performing, very soon a few of them will be among the top 100 global lenders.