Post by : Saif Rahman

As 2026 kicked off, the Indian rupee started on a softer note, inching down against the U.S. dollar due to regular dollar demand from corporations. The limited trading activity, courtesy of New Year holidays in global markets, kept fluctuations in check, traders noted.

On Thursday, the rupee traded around 89.95 per U.S. dollar, showing a minor decline of roughly 0.1% from the prior session. Market observers characterized this movement as trivial and anticipated due to the thin trading environment at the year’s onset.

Traders pointed out that numerous large firms were acquiring dollars to satisfy routine payment obligations, including imports and international commitments. The lower number of active traders across financial markets due to holidays amplified the impact of these standard transactions on the rupee's trajectory.

This trading pattern echoed much of 2025, during which the demand for dollars consistently surpassed supply. This imbalance exerted persistent pressure on the rupee throughout the year. Observers noted that the level of 90 rupees per dollar is a crucial psychological barrier; surpassing this level could induce further dollar purchases in the market.

Nevertheless, experts advised caution against overinterpreting the currency’s first-day performance. With minimal trading volume, even modest transactions can cause slight price shifts without genuinely reflecting the currency’s true strength or weakness.

Looking forward, traders indicated that foreign investment in Indian equities will be crucial in 2026. Last year, record withdrawals by foreign investors from the Indian stock markets added downward pressure on the rupee. A return of foreign funds this year may alleviate dollar demand and bolster the currency.

Indian stock markets began the year with slight gains, despite Wall Street closing 2025 on a weaker note. A stable or upward trend in equities could enhance investor confidence and provide some support to the rupee in the upcoming months.

Currently, the rupee's minor dip underscores the ongoing challenges driven by dollar demand while indicating that low holiday trading has kept volatility in check at the year's start.

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