Currency Market News: Rupee weakens 22 paise to 85.67 vs dollar amid Pahalgam attack fallout

Rupee slipped 22 paise to 85.67 against the US dollar in early trade on Thursday, as investor sentiment took a hit from weak domestic equities and fresh geopolitical tensions following a deadly terror attack in Pahalgam, Jammu & Kashmir.

Forex dealers attributed the fall to heightened regional risk perception in the wake of the attack that killed 26 civilians. The market is reacting to increased geopolitical uncertainty. Risk aversion typically leads to rupee weakness in such scenarios.

At the interbank foreign exchange market, the rupee opened at 85.60 and touched an intraday low of 85.67, down from Wednesday’s close of 85.45. The domestic currency had already lost 26 paise in the previous session.

Also Read: Indus Waters Treaty Suspended: What India’s unprecedented move after Pahalgam attack means for Pakistan

Amit Pabari, MD at CR Forex Advisors, said, “Historical patterns suggest that such events initially trigger rupee depreciation due to risk aversion. During the 2016 Uri and 2019 Pulwama attacks, the rupee weakened initially but rebounded following decisive Indian responses, underscoring that investor confidence hinges on India’s strategic stance post-incident,” PTI reported.

India has downgraded diplomatic relations with Pakistan, expelling military attaches, suspending the 1960 Indus Water Treaty, and shutting the Attari land transit post, citing evidence of cross-border links to the attack.

Globally, the US dollar rebounded sharply. The dollar index rose from 97.92 to 99.94, driven by optimism over possible de-escalation in US-China trade tensions. However, by Thursday morning, it eased slightly to 99.67 — down 0.17 per cent.

Meanwhile, Brent crude saw a marginal gain of 0.09 per cent to trade at USD 66.21 per barrel.

“The near-term rupee outlook remains fragile, with dollar strength and elevated uncertainties in play. Technically, the rupee may find support at 85.20 and face resistance around 85.50; a breakout above could push it toward 85.80,” added Pabari.

Also Read:First Trade: Indices snap 7-day winning streak; Sensex down over 50 pts, Nifty near 24,280

Stock market update

Indian equities opened in the red on Thursday, mirroring mixed cues from Asian peers and tracking caution ahead of monthly expiry.

The BSE Sensex was down at 80,058 in early trade, while the NSE Nifty50 slipped 50 points to 24,277.9. However, broader markets continued their positive trend with mild gains.

Banking stocks were under pressure, pulling the Bank Nifty lower, with major drags coming from HDFC Bank, ICICI Bank, and Kotak Mahindra Bank.

Foreign institutional investors (FIIs), however, remained net buyers, infusing Rs 3,332.93 crore into domestic equities on Wednesday, according to exchange data.

(With inputs from PTI)