FPI flows pressure, global uncertainties have pulled rupee down over 1% this month

Rupee dials 91

• Rupee falls to 91.0650 vs US dollar amid foreign outflows and trade uncertainty
• Limited RBI intervention and global tensions add pressure on the rupee
• Trump's tariff threats over Greenland worsen risk sentiment and impact INR

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The rupee has once again tested a psychologically important level of 91, nearly after a month, amid uncertainties such as persistent outflows from Indian equities, delay in the US-India trade deal and some fresh global triggers such as American President Donald Trump’s threat to impose tariffs on select European economies over Greenland, currency experts said.

Limited intervention by the Reserve Bank of India (RBI) is also adding pressure to the local currency.

The domestic currency opened a tad weaker on January 20, but declined rapidly to 91.0650 against the US dollar.

This level was touched nearly after a month by the local currency. Last time when the currency breached the 91 level against the greenback was on December 17, when it hit 91.06, according to Bloomberg data.

The rupee has been under pressure despite the dollar index being on a declining trend.

Foreign investors withdraw more than $3 billion

Amit Pabari, managing director at CR Forex Advisors, explained this saying that foreign outflows remain the single-biggest drag.

Foreign investors have withdrawn more than $3 billion from Indian equities so far in January, and the steady outflow has made the rupee increasingly sensitive to even modest dollar demand. With capital moving out, stability becomes harder to defend.

“Beyond FPI flows, trade uncertainty continues to hover in the background. The most critical unresolved issue remains the prospects of a comprehensive and balanced trade agreement between India and the United States,” Pabari added.

The Greenland angle

Further, the issue over Greenland has put pressure on the local currency.

“Continued global uncertainties, including US pressure on Greenland, have led to a risk-off sentiment in markets. This has led to a strong demand for precious metals, with gold and silver prices touching an all-time high. The risk-off sentiment, along with strong offshore hedging in USDINR, has led to the USDINR touching 91 per dollar. The current macro environment is likely to maintain depreciating pressure on the INR,” said Sameer Karyatt, Executive Director and Head of Trading at DBS Bank India in a report.

Further, the DBS report said that US President Donald Trump’s campaign to impose American rule over Greenland in the name of national security is a concern.  Following a decision by Denmark and several European NATO allies to send military personnel to Greenland for an exercise, Trump threatened to impose a 10 percent additional tariff on goods from the UK, Denmark, Norway, Sweden, France, Germany, the Netherlands, and Finland, starting February 1.

These levies are scheduled to rise to 25 percent on June 1 until a deal for the "Complete and Total purchase of Greenland" is finalised. This move has effectively derailed the July 2025 "Turnberry" trade agreement, which had temporarily stabilised tariffs at 15 percent, in exchange for zero duties on US industrial goods, the DBS report added.