Rupee pared its initial gains and ended the day lower by 7 paise at 85.40 against the US dollar on Friday, due to heightened geopolitical tensions and a negative trend in domestic markets.
Forex traders attributed the rupee’s decline to escalating geopolitical tensions, particularly following a terrorist attack in Pahalgam, Jammu & Kashmir, which weighed on market sentiment. Additionally, a muted trend ia stronger US dollar inden domestic equities and x further dampened investor confidence.
At the interbank foreign exchange market, the rupee opened at 85.17 and fluctuated between an intra-day high of 85.08 and a low of 85.65 against the greenback. It ultimately closed at 85.40 (provisional), reflecting a decline of 7 paise from its previous closing level. On Thursday, the rupee had gained 12 paise to settle at 85.33 against the US dollar.
“We expect the rupee to trade with a negative bias due to ongoing geopolitical tensions and weak domestic market conditions. However, continued foreign institutional investor (FII) inflows and overall weakness in the US dollar may prevent a sharp decline in the rupee. The USD-INR spot price is likely to range between 85.00 and 85.90,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, also noted that the rupee traded weakly at 85.45, down by 0.10 rupees, as the dollar index strengthened to 99.65, putting pressure on emerging market currencies. He pointed out that concerns over the geopolitical situation between India and Pakistan, especially following India’s withdrawal from the Indus Water Treaty, heightened market risks. He added, “This has raised risk perceptions, and any further escalation could lead to foreign fund outflows, adding to rupee volatility. The rupee is expected to range between 85.00 and 85.85, with downside risks if tensions increase further.”
On Tuesday, a deadly terrorist attack in Pahalgam, Jammu & Kashmir, killed at least 26 people, mostly tourists, in one of the worst attacks on civilians in Kashmir in years. Prime Minister Narendra Modi condemned the attack, vowing to identify and punish those responsible, including their backers, “beyond their imagination.”
The dollar index, which tracks the greenback’s strength against a basket of six major currencies, was trading higher by 0.24per cent at 99.61.
Meanwhile, Brent crude oil fell 0.66 per cent to USD 66.11 per barrel in futures trade.
Stock Market Summary
Indian equity indices closed lower for the second consecutive day on April 25, with sector-wide selling pressure, except in the IT sector. The Sensex dropped by 588.90 points, settling at 79,212.53, while the Nifty declined by 207.35 points to close at 24,039.35. Broader market indices also saw deeper losses, with Nifty Midcap 100 and Smallcap 100 falling over 2.5 per cent each.
(With inputs from PTI)
