Indian Rupee Slips Slightly as Corporate Dollar Demand Marks Start of 2026

Post by : Saif Nasser

The Indian rupee began the new year on a softer note, slipping slightly against the U.S. dollar as routine dollar buying by companies weighed on the currency. Low trading activity due to New Year holidays in global markets kept the movement limited, traders said.

On Thursday, the rupee fell to around 89.95 per U.S. dollar, marking a small decline of about 0.1% compared with the previous session. Market participants described the move as mild and expected, given the thin trading volumes at the start of the year.

Traders explained that many large companies were buying dollars to meet regular payment needs, such as imports or overseas obligations. With fewer active traders in the market due to holidays in major financial centers, these routine flows had a bigger influence on the rupee’s direction.

The day’s trading reflected a pattern seen throughout much of 2025, when demand for dollars often exceeded supply. This imbalance kept steady pressure on the rupee for most of the year. According to traders, the level of 90 rupees to the dollar remains an important psychological mark. A clear move beyond that level could lead to more dollar buying in the market.

However, experts also cautioned against reading too much into the first day’s movement. With low volumes, even small trades can push prices slightly up or down without showing the true strength or weakness of the currency.

Looking ahead, traders said foreign investment in Indian equities will be a key factor to watch in 2026. Last year, foreign investors pulled out record amounts of money from Indian stock markets, adding pressure on the rupee. If foreign funds return this year, it could help ease the demand for dollars and support the currency.

Indian stock markets started the year with mild gains, even as Wall Street ended 2025 on a weaker note. A stable or positive trend in equities could improve investor confidence and provide some relief to the rupee in the coming months.

For now, the rupee’s small dip highlights the challenges it continues to face from dollar demand, while also showing that low holiday trading kept volatility under control at the start of the new year.