Rupee falls 42 paise to close at 84.77 against US dollar on heightened cross-border tensions

Mumbai, May 7 (PTI) The rupee depreciated 42 paise to close at 84.77 against the US dollar on Wednesday, as heightened cross-border tensions following India's military strikes against terrorist camps in Pakistan and Pakistan-Occupied Kashmir weighed on the domestic currency.

Indian armed forces on early Wednesday carried out missile strikes on nine terror targets in Pakistan and Pakistan-Occupied Kashmir including the Jaish-e-Mohammad stronghold of Bahawalpur and Lashkar-e-Taiba's base in Muridke.

The military strikes were conducted under Operation Sindoor two weeks after the Pahalgam attack that killed 26 civilians.

Forex traders said the Indian rupee declined on Wednesday after the Indian Army conducted 'Operation Sindoor' and struck terrorist camps in Pakistan and Pakistan-Occupied Kashmir, which weighed on the domestic currency.

At the interbank foreign exchange, the domestic unit opened at 84.65 and moved between an intra-day high of 84.47 and a low of 84.93 against the greenback. The unit ended the session at 84.77, registering a fall of 42 paise over its previous closing level.

On Tuesday, the rupee settled for the day 5 paise lower at 84.35 against the US dollar amid growing uncertainty and a cautious recalibration of risk appetite.

"We expect the rupee to trade with a positive bias on the weak dollar and positive domestic and global markets. FII inflows may also support the rupee. However, simmering geopolitical tensions between India and Pakistan and a positive crude oil prices may cap sharp upside," Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan, said.

Choudhary further noted, "Traders may remain cautious ahead of the US FOMC meeting outcome. The US Federal Reserve is expected to keep interest rates unchanged. USD-INR spot price is expected to trade in a range of 84.40 to 85.10." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.23 per cent at 99.46.

Dilip Parmar, Senior Research Analyst, HDFC Securities, said, amidst lingering geopolitical concerns and a stronger dollar index, the Indian rupee experienced its most significant single-day drop in a month, continuing its decline for the second day.

"Furthermore, consistent dollar demand from oil importers and hedgers have exerted downward pressure on the rupee over the past two days. Spot USD-INR is anticipated to trend upward, potentially reaching 85.70 if it holds above 85. Conversely, 84.25 presents a significant support level," Parmar said.

Brent crude, the global oil benchmark, rose 0.42 per cent to USD 62.41 per barrel in futures trade.

The domestic equity market faced heavy volatility on Wednesday after India launched missile strikes on terrorist hideouts in Pakistan and Pakistan-Occupied Kashmir and finally ended the day on a positive note.

The 30-share BSE Sensex advanced 105.71 points, or 0.13 per cent, to close at 80,746.78, while the Nifty gained 34.80 points, or 0.14 per cent, to settle at 24,414.40.

Foreign institutional investors (FIIs) bought equities worth Rs 2,585.86 crore on a net basis on Wednesday, according to exchange data. PTI DRR HVA

Source: PTI