India Rupee extends fall as border tensions rise; opens lower at 85.84/$

Indian Rupee extended its decline on Friday, a day after logging the worst session in over two years, as hostilities on the border escalated after Pakistan fired missiles in Jammu & Kashmir on Thursday evening. 

 

The domestic currency opened 12 paise lower at 85.84 after ending at 84.72 against the greenback on Thursday, according to Bloomberg data. The currency has fallen by 1.47 per cent this month, after posting two consecutive months of depreciation. 

 

Pakistan fired eight missiles directed at Satwari, Samba, RS Pura and Arnia, all in Jammu & Kashmir on Thursday evening, which were all intercepted or blocked by air defence units. This comes in after India neutralised air defence radars and systems at many locations in Pakistan, a retaliation to the latter's attempt to engage several military targets.  The rupee fell yesterday on the escalation of hostility between India and Pakistan, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.  "The opening will be at 85.97, with a rise in the dollar index and could move to 86.50 unless the Reserve Bank of India (RBI) steps in to sell dollars." 

 

Read Stock Market LIVE Updates: Sensex slips 400 pts, Nifty tests 24,000 amid India-Pak tensions

 

During any war-like scenario, investors usually flee towards safe-haven assets, causing capital outflows from the market and weakening the currency in the short term, Amit Pabari, managing director at CR Forex Advisors, said. "This weakness is likely to stay for the short term, as the war tensions ease out and strong fundamental data, the Indian rupee is poised to appreciate in the medium term."  Meanwhile, huge option and Non-deliverable forwards (NDFs) trading volumes, along with the climbing implied volatility, are a clear signal that forex traders see more Indian rupee weakness in the near term, according to Bloomberg. 

 

On the global front, the dollar index headed for a weekly gain after the US-UK trade deal was announced. US President Donald Trump also hinted at lower China tariffs if talks go well. The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was down 0.01 per cent at 100.63. 

 

US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet in Switzerland with Chinese Vice Premier He Lifeng to discuss trade this weekend.

 

Crude oil prices rose on Friday amid optimism about the potential for further US trade deals. Brent crude price was up 0.40 per cent to $63.09 per barrel, while WTI crude prices were higher by 0.40 per cent at 60.15, as of 9:20 AM.