The Indian rupee extended its losing streak on Friday, closing at 90.87 against the US dollar and recording its most significant single-day decline in nearly two months. The local currency weakened substantially from its previous session close of 90.30 per dollar, representing a notable 57-paise fall that underscored mounting pressure on emerging market currencies.

Weekly Performance and Market Dynamics

The rupee's Friday decline capped a challenging week for the currency, which had already shown signs of weakness in earlier sessions. The following table illustrates the currency's recent performance:

Foreign exchange markets remained closed on Thursday due to polling for the Mumbai municipal corporation elections, which contributed to concentrated trading activity in Friday's session.

Key Pressure Factors

The rupee's decline was primarily driven by two significant factors that continue to challenge emerging market currencies. Relentless foreign fund outflows have maintained consistent pressure on the local currency, as international investors reduce their exposure to Indian markets. Simultaneously, the firm US dollar has continued its strength against a basket of global currencies, creating additional headwinds for the rupee.

These factors have created a challenging environment for the Indian currency, with the combination of reduced foreign investment and dollar strength proving particularly impactful on Friday's trading session.

Market Outlook and Monitoring Factors

Market participants remain highly attentive to several key indicators that are expected to influence the rupee's near-term trajectory. Global dollar strength continues to be a primary concern, as sustained US dollar appreciation typically creates pressure on emerging market currencies including the rupee.

Foreign portfolio flows represent another critical factor under close observation, with the direction and magnitude of these flows likely to significantly impact currency movements in upcoming sessions. The combination of these external factors suggests that market volatility may persist as traders navigate the evolving global financial landscape.

The Indian rupee extended its losing streak for the third consecutive session, falling 10 paise to 90.44 against the US dollar in early Friday trading. The currency faced headwinds from continued foreign fund outflows and a robust US dollar, though forex traders noted that lower crude oil prices and favorable equity market conditions helped prevent a sharper decline.

Currency Performance Details

The rupee's trading session showed initial weakness from the opening bell. The currency commenced trading at 90.37 against the US dollar at the interbank foreign exchange market before sliding to 90.44, representing a 10 paise decline from the previous session's closing level.

The currency's recent performance reflects a consistent downward trend, with the rupee losing 11 paise on Wednesday to close at 90.34, following an earlier decline of 6 paise in the preceding session. Foreign exchange markets remained closed on Thursday due to a holiday for Mumbai municipal corporation elections.

Market Factors and Global Context

The dollar index, which measures the US dollar's strength against a basket of six major currencies, declined marginally by 0.02% to 99.10. Despite this slight weakening, the dollar maintained its overall strength, contributing to pressure on emerging market currencies including the rupee.

Analysts highlighted that December US inflation data significantly impacted dollar valuations and reduced market expectations for immediate interest rate cuts by the Federal Reserve. This development has strengthened the dollar's appeal among investors seeking higher yields.

Trade Deficit Impact

India's trade deficit figures released on Thursday added to the rupee's challenges. The country's trade deficit widened to $25.04 billion in December 2025, compared to $24.53 billion in November and $22.00 billion in December 2024.

The expanding trade deficit reflects increased import costs relative to export earnings, putting additional strain on the rupee as demand for foreign currency rises to meet import obligations.

Supporting Factors

Despite the overall negative sentiment, certain factors provided some cushion to the rupee's decline. Lower crude oil prices offered relief, as India imports a significant portion of its energy requirements, making the country sensitive to oil price fluctuations. Additionally, positive sentiment in domestic equity markets helped maintain some investor confidence, preventing a more severe currency depreciation.