Rupee Opens 18 Paise Lower at 84.62/$ Amid Escalating India-Pakistan Tensions
The Indian Rupee opened 18 paise weaker at 84.62 against the US dollar, weighed down by rising geopolitical tensions following India’s precision military strikes on terror targets in Pakistan and Pakistan-occupied Kashmir (PoK). The currency had closed at 84.44 on Tuesday, according to Bloomberg data.
In a pre-dawn operation, the Indian armed forces carried out focused strikes on nine terror infrastructure sites across the border, days after a major terror attack in Kashmir. The military confirmed that the action was 'focused, measured and non-escalatory', ensuring civilian and military facilities were not targeted. However, the development has reignited concerns over further escalation, putting pressure on the Indian currency.
“The military strikes bring the focus sharply back to geopolitical risks, and this has translated into weakness in the rupee", said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP. He added that the Non-deliverable Forwards (NDF) market reflected a mild weakening of the rupee in thin trading, with a fall of around 20-25 paise post the strikes.
Bhansali noted that some speculative dollar buying and hedging by importers may add pressure on the rupee, although the Reserve Bank of India is expected to intervene to prevent any sharp depreciation. “We think the RBI will be active to stop any major slide", he said.
On the equities front, foreign institutional investors (FIIs) have been net buyers for 14 consecutive sessions, with inflows touching nearly Rs 44,500 crore. However, Bhansali cautioned that any significant escalation may trigger limited profit-booking by FIIs, though most are likely to wait for more clarity.
Meanwhile, the US Dollar Index remains range-bound below the 100 mark as investors await fresh cues from the US Federal Reserve on interest rate policy. “84.25 is a key support level for the rupee, while resistance lies at 84.90 and 85.20”, said Kunal Sodhani, Vice-President at Shinhan Bank.
Crude oil prices edged higher after the US slashed its production forecast for the year. Brent crude rose 0.64% to $62.55 per barrel, while WTI was up 0.78% at $59.55, potentially adding to inflationary concerns for oil-importing nations like India.
All eyes remain on further developments along the border, as any retaliatory move by Pakistan could sway market sentiment and add volatility to the rupee in the near term.
