The Indian Rupee (INR) has experienced a significant depreciation against the US Dollar (USD), dropping by 10 paise to 90.44 in early trading on January 16, 2026. This marks the third consecutive session of decline for the domestic currency, influenced heavily by a sustained outflow of foreign investments and a globally strong dollar. Some reports indicate an even sharper fall, with the rupee closing at 90.8650 per dollar, its worst single-day decline in nearly two months. Several key factors are contributing to this persistent pressure on the INR. Firstly, the **strong US dollar** continues to be a major headwind, with the US Dollar Index (DXY) climbing to a six-week high and remaining around 99.3 due to robust US economic data and tempered expectations for Federal Reserve interest rate cuts. Secondly, **hawkish comments from the US Federal Reserve officials** further bolster the dollar, as a resilient US labor market reduces the urgency for aggressive rate cuts. Thirdly, **India's merchandise trade deficit** slightly increased to $25.04 billion in December from $24.53 billion in November, as imports rose, contributing to higher dollar demand. Fourthly, a **delay in the India-US trade deal** continues to negatively impact the rupee's outlook, as a favorable outcome could reverse foreign institutional investor (FII) outflows. Lastly, **Foreign Portfolio Investor (FPI) outflows** remain a critical concern, with continuous foreign fund outflows actively influencing the rupee's downward trend. While the Reserve Bank of India (RBI) has reportedly intervened by selling dollars through state-run banks to limit losses, these interventions have not fully reversed the depreciation trend, with some analysts suggesting they remain ineffective amidst structural challenges. The rupee's proximity to its all-time low of 91.0750 recorded in December 2025 underscores the mounting pressure.