The currency, which was Asia’s worst performing in 2025, weakened to an all-time intraday low of 91.74/$1, and later closed at an all-time low of 91.695/$1 on Wednesday.
The rupee had closed at 90.97/$1 on the previous day. The central bank, which usually sells dollars to curb excess weakness in the rupee, stayed away and did not intervene, traders said.
The rupee has already lost 2% in January so far.
Rising bond yields in Japan exacerbated the fall in the Indian rupee, as investors sold emerging market assets to repay yen-denominated loans.
“Rising Japanese bond yields are now forcing an unwind of yen carry trades, leading to outflows from emerging markets like India, higher dollar demand, and continuous pressure on the rupee,” said Kunal Sodhani, head of treasury at Shinhan Bank India. “With flows driving the currency, weakness may persist, and RBI intervention will likely happen only to curb excess volatility.”
Japan has long battled a stagflation but raised policy rates to a 30-year high of 0.75% in December, causing market borrowing costs to harden. That has set off a retreat in yen carry trades, as the cost of borrowing through the Japanese monetary unit rose, shaving margins and lowering the value of growth assets in the emerging markets.The Japanese central bank is set to keep borrowing costs steady at its two-day policy meeting ending on Friday, Reuters reported earlier this week.
The rupee is expected to trade between the range of 90.60/$1 to 91.60/$1 on Thursday. Dealers expect this as new stop loss positions would be added, thus increasing dollar demand, they said.
Foreign portfolio investors have sold over $2.8 billion from Indian stocks and bonds so far in January. They sold $11.8 billion in CY 2025, NSDL data showed.
“It seems like the central bank conducted some buy-sell swaps of various tenures because forward premiums came down. But intervention happened straight at around 91.74/$1 levels. I expected the record low to be breached but not by such a large margin,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
Forward premiums for one month stood at 2.95% from 3.16%, while one year forward premiums stood at 2.71% from 2.83% at the start of the week.
