The rupee regained ground to close 17 paise higher at 85.41 (provisional) against the US dollar on Friday, recovering from an early slide as the Reserve Bank of India (RBI) reportedly intervened to curb sharp depreciation amid escalating Indo-Pak tensions.
The domestic currency, which opened on a weak note at 85.88 amid heightened border hostilities, moved within a range of 85.32 to 85.88 during the trading session before settling at 85.41, up 17 paise from its previous close of 85.58, according to data from the interbank foreign exchange market.
The rupee’s recovery followed reports of dollar sales by the RBI aimed at stabilising the currency, which had on Thursday posted its steepest single-day fall in over two-and-a-half years, plummeting 81 paise to close at 85.58, amid a surge in geopolitical tensions along the western border.
"Indian rupee opened weak on Friday amid flaring up of geopolitical tensions across the border. Weak domestic markets and a rise in crude oil prices also weighed on the rupee. However, the domestic currency recovered in the latter half of the day on reports of selling of dollars by the Reserve Bank of India as well as a correction in the US dollar index," said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
The rupee’s gains came as the dollar index, which tracks the greenback’s performance against a basket of six major currencies, fell 0.26 per cent to 100.38. Global oil benchmark Brent crude, meanwhile, rose 1.80 per cent to trade at USD 63.97 per barrel in futures trading, further weighing on market sentiment.
India’s financial markets also saw a sharp decline, with the 30-share BSE Sensex dropping 880.34 points, or 1.10 per cent, to close at 79,454.47, while the broader Nifty slipped 265.80 points, or 1.10 per cent, to settle at 24,008.00. Foreign institutional investors (FIIs) bought equities worth Rs 2,007.96 crore on a net basis on Thursday, according to exchange data.
The Indian Army said it had effectively repulsed multiple drone and missile attacks by Pakistan’s armed forces along the western border on the intervening night of 8-9 May, including strikes targeting military installations in Jammu, Pathankot, Udhampur, and other locations. The heightened tensions have raised concerns over the potential impact on financial markets and the rupee’s stability.
Choudhary added, “We expect the rupee to trade with a negative bias as the geopolitical tensions between India and Pakistan may continue to weigh on the domestic unit. Rising crude oil prices and risk aversion in the domestic markets may further pressurise the rupee. However, FII inflows may support the rupee at lower levels. Any de-escalation of tensions over the weekend may also support the rupee at lower levels.”
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