The rupee is consolidating as the dollar faces a barrier

Trump’s threat of a 25 percent tariff on countries doing business with Iran is potentially negative for the local currency, as Iran is India’s top rice export destination. | Photo credit: Getty Images

From the rupee’s perspective, it is positive if the dollar weakens. However, there was not much gain. In fact, the domestic unit, which ended at 90.19 on Tuesday, has largely charted a narrow sideways trend over the past week.

That said, the rupee is not without risks. Trump’s threat of a 25 percent tariff on countries doing business with Iran is potentially negative for the local currency, as Iran is India’s top rice export destination.

Still below the RBI’s inflation target of 2-6 percent, CPI inflation hardened to 1.33 percent in December, compared to 0.71 percent in November. On the other hand, RBI’s liquidity infusion worth $10 billion of rupees (through a $10 billion buy-sell auction) could weigh on the domestic unit.

Nevertheless, the impact of the rise in inflation and liquidity injection on the rupee may be temporary. What could be worrying is the capital outflow. Net FPI outflows since the start of 2026 stood at $1.3 billion on Tuesday (Jan 13). Unless the stock market recovers, there may be more foreign selling, which could drag down the rupee.

Graphic

The rupee, after encountering resistance at 89.40 on December 25, started falling. But last week the price moved within the price range of 89.80-90.30. So the next part of the trend depends on the direction of the break in this region.

If the local currency crosses the hurdle at 89.80, it may retest the barrier at 89.40. If this is violated it could quickly rise to 89 or possibly 88.80. On the other hand, if the support at 90.30 is declared invalid, the rupee may fall to 90.50 and 91.

How the rupee moves will also depend on the dollar index, which is now facing resistance at 99 and 99.50. Another important barrier is at 100.20. If the dollar index moves past this, the medium-term outlook could turn positive, in which case the rupee could hit a record low.

If the dollar index falls from current levels, it will have support at 98.70. If it is broken, the price could fall further towards 98. In this scenario, the rupee could try to move past the resistance at 89.40.

Outlook

The rupee faces challenges and so does the dollar index. Given the circumstances, the dollar-rupee exchange rate could remain in the range of 89.40 to 90.30 in the near term.

Published on January 13, 2026