The Indian rupee experienced its steepest single-day decline in a month, weakening by 0.5% to 84.8250 against the U.S. dollar, as escalating tensions between India and Pakistan weighed on investor sentiment.
Geopolitical Impact on Currency Markets
India’s Operation Sindoor, which targeted nine terror-linked sites in Pakistan and Pakistan-occupied Kashmir (PoK), has led to heightened concerns over regional stability. Pakistan responded by claiming it had shot down five Indian fighter jets, marking the worst military confrontation between the two nations in over two decades.
Market Reaction and RBI Intervention
- The rupee’s losses were partially curbed by dollar selling interest from a large conglomerate near the 84.90 level and intermittent offers from state-run banks.
- The Reserve Bank of India (RBI) is expected to step in to limit sharp swings, with traders anticipating intermittent pressure on the currency depending on how the situation evolves.
- Asian currencies also weakened, with the offshore Chinese yuan declining to 7.22 and the Indonesian rupiah down 0.5%.
Stock and Bond Market Movements
- India’s benchmark equity indexes, the BSE Sensex and Nifty 50, fluctuated between gains and losses before closing slightly in the green.
- The benchmark 10-year bond yield dipped to 6.3381%, reflecting cautious investor sentiment.
Global Economic Factors
Investors are also closely watching the U.S. Federal Reserve’s policy decision, with no changes to benchmark interest rates expected.
As geopolitical tensions continue to unfold, market participants remain cautious, with the rupee likely to face intermittent pressure in the near term.
