Indian Rupee falls 18 paise to 85.45/$ as tensions escalate with Pakistan

Indian rupee lost its early gains to end weaker against the US dollar on Friday, as rising tension with Pakistan spooked a risk-off sentiment among traders. 

 

The domestic currency closed 18 paise weaker at 85.45 after ending at 85.27 against the greenback on Thursday. The currency lost its initial gains after it opened 8 paise stronger at 85.19 against the dollar. 

 

The stock market, along with Indian currency, lost momentum with tensions between India and Pakistan escalating after a ceasefire violation across the Line of Control (LoC) by Pakistan, following the Pahalgam terror attack. Hours after suspending the Simla Agreement of 1971, Pakistan Army troops violated the ceasefire at the LoC and opened fire at multiple locations on Thursday night. The Indian Army, on its part, has responded "effectively".  The ceasefire violation along the LoC comes days after the Pahalgam terror attack, which left 26 dead, mostly tourists, at the Baisaran valley near Pahalgam, Jammu and Kashmir.

 

 

 

A weakness in Indian capital markets weighed on the rupee, driven by concerns around geopolitical tensions between India and Pakistan, following news of India's withdrawal from the Indus Water Treaty, according to Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities. "This move has heightened risk perception, and any further escalation could lead to foreign fund outflows, adding to rupee volatility."

 

Meanwhile, the dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was up 0.32 per cent at 99.69, as of 3:35 PM IST. "Technically, the dollar index is approaching key levels—support sits at 99.00, while resistance looms at 100," according to Amit Pabari, managing director at CR Forex Advisors. The rise in dollar value came as China is considering suspending its 125 per cent tariff on some US imports as the costs of the trade war weigh heavily on certain industries, Bloomberg reported, quoting sources.

 

 

Despite strong domestic fundamentals, the Indian rupee faces near-term pressure from a firm dollar and lingering geopolitical risks, Pabari noted. "The dollar-rupee pair is expected to find support around 85.20 and resistance at 85.60, with a breakout potentially pushing it toward 85.80."

 

Foreign portfolio investors (FPIs) continued to buy equities for the seventh consecutive day on Thursday. Global funds bought stocks worth ₹8,250.53, taking the seven-day purchase to ₹29,450.5 crore. Meanwhile, as of 3:30 PM, the Sensex closed 0.71 per cent or 570.8 points lower at 79,227, while the Nifty ended 0.86 per cent or 207.3 points lower at 24,039. 

 

Crude oil prices fell after an early advance on Friday amid expectations of increased Opec+ supply and uncertainty over US-China tariff talks. Brent crude oil was down 0.62 per cent to $66.14 per barrel, while WTI crude was down 0.59 per cent at 62.42 per barrel as of 3:55 PM IST.