Indian Rupee reverses early losses; snaps three-day fall to end at 85.38/$

Indian rupee closed stronger against the dollar after posting early losses on Friday, amid increasing hostilities on the border between the nuclear-armed rivals India and Pakistan. 

 

The domestic currency closed 34 paise higher at 85.38 after ending at 84.72 against the greenback on Thursday, according to Bloomberg data. The currency snapped three straight days of losses on Friday, while having posted two consecutive months of depreciation. 

 

The appreciation in the currency comes amid reports that the Reserve Bank of India is ready to use foreign reserves to preserve currency stability amid escalating tensions on the India-Pakistan border. The central bank doesn’t expect wild swings in the rupee, Bloomberg reported, quoting sources.  

 

 

The rupee traded in a volatile range amid ongoing border tensions between India and Pakistan, with signs of escalation keeping market participants cautious, according to Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities. "Morning weakness in the rupee was met with profit booking by short-sellers, as the currency found support near the 85.90 - 86.00 zone. Any fresh developments on the geopolitical front are likely to have a significant impact on the rupee’s direction."

 

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. 

 

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, the dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was down 0.19 per cent at 100.44. The dollar index headed for a weekly gain after the US-UK trade deal was announced. 

 

Crude oil prices rose on Friday amid optimism about the potential for further US trade deals. Brent crude price was up 1.77 per cent to $63.95 per barrel, while WTI crude prices were higher by 1.89 per cent at 61.04, as of 3:40 PM.