Pahalgam terror attack: Rupee, bond weaken on rising India-Pak tension

The rupee settled at 85.45 per dollar on Friday, against the previous close of Rs 85.27 per dollar. It depreciated up to 85.67 against the dollar during the day

The rupee on Friday settled 0.2 per cent weaker against the dollar after a choppy trade due to month-end demand for the greenback, said dealers.

 

The rising tension between India and Pakistan further weighed on the local currency.

 

The rupee settled at 85.45 per dollar on Friday, against the previous close of 85.27. It depreciated to 85.67 against the dollar during the day.

 

“The rupee opened with a gap but there is resistance around the 85 per dollar level,” said a dealer at a state-owned bank.

 

“There was month-end dollar demand and also caution because of what is happening in Kashmir,” he added.

 

The domestic unit appreciated by 0.19 per cent during this calendar year so far. It has witnessed 0.02 per cent appreciation in April so far.

 

On the other hand, yield on the benchmark 10-year government bond inched up by 5 basis points (bps) as traders lightened their position ahead of the weekend, said dealers. 

 

Foreign banks and primary dealers sold bonds at a profit. This further aided the yields.

 

“There was some profit booking. Foreign banks and primary dealers were on the selling side, while public sector banks were on the buying side,” said a dealer at a primary dealership.

 

“People also lightened their positions ahead of the weekend, because of the tension between Pakistan and India as we don’t know what may unfold during the weekend,” he added.

 

After witnessing continuous fall in yields post the Reserve Bank of India’s Monetary Policy Committee meeting outcome, government bond yields witnessed hardening during the week due to technical resistance and outflows from the debt segment.

 

The total foreign portfolio investment in Indian government securities designated under the fully accessible route (FAR) stood at ₹2.96 trillion as of Friday. This is against ₹3 trillion at the end of March 2025, according to data by the Clearing Corporation of India Ltd (CCIL).

 

Foreign investors have net sold ₹10,234 crore worth of domestic debt in April so far as the yield spread between 10-year US Treasury bond and domestic benchmark 10-year bond narrowed to 190 bps, the lowest since October 2004.