Rupee recovers to open stronger at 84.65/$; India-Pak tensions in focus

Indian rupee opened stronger on Thursday, a day after seeing the steepest decline in almost one month as investors watch out for further tensions between India and Pakistan. 

 

The domestic currency opened 38 paise higher at 84.65 after ending at 84.83 against the greenback on Wednesday, according to Bloomberg data. The currency has risen by 0.09 per cent this month, after posting two consecutive months of depreciation. 

 

On the geopolitical front, Pakistan said it “reserves the right to respond, in self-defence, at a time, place, and manner of its choosing,” after India hit nine targets, part of its 'Operation Sindoor' on early Wednesday. However, officials said at an official media briefing that the Indian armed forces are fully prepared to respond to any possible misadventures by Pakistan that could escalate the situation. 

 

 

While India emphasised the targeted nature of the strike, Pakistan's warning of "preparedness for an all-out war” has raised investor alarms, according to Amit Pabari, managing director at CR Forex Advisors. Foreign portfolio investors (FPIs) typically respond swiftly to such regional instability, prompting short-term rupee weakness, he said. FPIs continued to be buyers of Indian stocks even as tensions on the border escalated, as they bought stocks worth ₹2,585.86 crore on Wednesday. 

 

On the global front, US President Donald Trump said that a 'major’ trade deal with a big country is coming. "Major trade deal with representatives of a big and highly respected country,” Trump said in a Truth Social post.

 

Meanwhile, the US Federal Reserve held interest rates steady as risks of both higher inflation and unemployment had risen. Jerome Powell stressed that the economy overall has continued to expand at a solid pace. 

 

The change in stance from confidence to caution has rattled investor sentiment and has caused the dollar to gain some strength, Pabari said. The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was up 0.02 per cent at 99.63.

 

Global investors will watch the Bank of England’s rate decision on Thursday, with a quarter-point cut expected and another likely in June, according to Bloomberg.

 

Crude oil prices edged higher as uncertainty over trade talks between the US and China weighed on investors' sentiments. Brent crude price was up 0.67 per cent to $61.53 per barrel, while WTI crude prices were higher by 0.83 per cent at 58.55, as of 9:15 AM.