Mumbai: The Indian rupee depreciated by 22 paise to 85.67 against the US dollar in early trade on Thursday, reflecting the impact of a combination of negative domestic equities and heightened geopolitical risks.
The rupee’s fall is also attributed to the aftermath of the deadly terror attack in Pahalgam, Jammu & Kashmir, which has created fresh uncertainty in the region and led to investor nervousness. As a result, the rupee struggled to maintain gains, continuing a trend that began earlier this week.
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At the interbank foreign exchange market, the rupee opened at 85.60 against the US dollar, but quickly fell to an intraday low of 85.67. This marked a 22 paise decline from its previous close. On Wednesday, the rupee had already weakened by 26 paise, settling at 85.45 against the greenback.
The currency’s movement also mirrors the broad market trend, where global and domestic events have combined to shape market expectations.
Forex traders cited the growing strength of the US dollar as another key factor behind the rupee’s fall. The US dollar index, which tracks the greenback’s performance against a basket of six major currencies, rebounded sharply from its recent low of 97.92 to 99.94.
This recovery has been attributed to improving sentiment regarding a possible de-escalation of US-China trade tensions. The dollar index was trading at 99.67, showing a slight drop of 0.17%, but it still remains stronger than it has been recently, further weighing on the rupee’s performance.
On the geopolitical front, the impact of the Pahalgam terror attack has intensified concerns about regional instability. The attack, which led to the deaths of at least 26 civilians, including tourists, prompted a swift response from the Indian government. India downgraded its diplomatic ties with Pakistan, expelled Pakistani military attaches, and announced the suspension of the Indus Water Treaty of 1960, along with immediate action to close the Attari land-transit post.
These measures underscore India’s firm stance against cross-border terrorism, which has contributed to investor wariness and further destabilised market conditions.
Experts have warned that the rupee’s near-term outlook remains uncertain, with key support levels seen around 85.20 and resistance at 85.50. Technical analysis suggests that if the rupee manages to break through this resistance, it could face further downward pressure, potentially heading towards the 85.80 mark. However, if stability returns, there may be a chance for recovery, depending on developments both domestically and globally.
Meanwhile, in the domestic equity market, the 30-share BSE Sensex dropped 281.71 points (0.35%) to 79,834.78, and the Nifty fell 77.70 points (0.32%) to 24,251.25. These losses were in line with the broader market sentiment, as traders digested the domestic geopolitical situation and its potential impact on market stability. Despite these declines, foreign institutional investors (FIIs) were net buyers of equities on Wednesday, with net purchases worth Rs 3,332.93 crore, showing continued confidence from global investors in the Indian market, albeit cautiously.
The rupee’s performance, coupled with the movement of equities and external factors, suggests a period of heightened volatility for the currency, with many analysts predicting that the situation will remain fluid in the coming weeks. The interplay of domestic economic factors, global events, and investor sentiment will be key in determining the rupee’s trajectory.
