Indian Rupee opens 18 paise weak at 84.62/$ as India-Pak tensions escalate

Indian currency opened weak on Wednesday as tensions on the border escalated after India’s precision strikes against Pakistan following last month’s Kashmir terror attack.

 

The domestic currency opened 18 paise lower at 84.62 after ending at 84.44 against the greenback on Tuesday, according to Bloomberg data. 

 

In the early hours of Wednesday, the Indian armed forces launched a series of strikes on terror infrastructure in Pakistan and Pakistan-occupied Kashmir (PoK). A total of nine sites were targeted by the Indian armed forces. 

 

The Indian armed forces said the strikes were “focused, measured and non-escalatory”, and specifically avoided civilian and military facilities. All eyes will be on the geopolitical tensions with any retaliatory measure from both sides. 

 

 

The military strikes against terrorist camps in Pakistan and POK bring focus on the escalation of conflict on to rupee, according to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP. 

 

Earlier, the Non-deliverable forwards (NDF) on the Indian rupee hinted at a currency weakening following the strikes. The initial reaction in the NDF markets has not been very large, with the rupee falling just about 20-25 paise in very thin markets, Bhansali said. "There could be some dollar buying by speculators and panicky importers, but we think the Reserve Bank of India will be present to stop any major slide of the rupee."

 

Meanwhile, foreign institutional investors (FIIs) have remained net buyers of Indian equities for 14 consecutive sessions, with total purchases amounting to nearly ₹44,500 crore. "We expect there could be some selling by FII in the equity markets, though that could be subdued as they would want to wait for further news of escalation to filter down," Bhansali said.  

 

The US Dollar Index remains capped below 100.00, still stuck in a wait-and-see range, according to Kunal Sodhani, vice-president of Shinhan Bank. Federal Reserve commentary is important to watch today for future rate trajectory, he said, adding that 84.25 acts as a support for the rupee while 84.90 a resistance, followed by 85.20 levels. Investors expect Fed officials to remain status quo on key rates as they await clarity on trade policies

 

In commodities, crude oil prices rose a day after the US cut its forecast for domestic crude production this year. Brent crude price was up 0.64 per cent to $62.55 per barrel, while WTI crude prices were higher by 0.78 per cent at 59.55.