The Indian Rupee weakened sharply by 89 paise against the US Dollar to close at 85.72 on Thursday, as tensions escalated between India and Pakistan. The Rupee has opened 19 paise stronger at 84.64 a dollar.
The US Federal Reserve kept the federal fund rate steady at 4.25–4.5%, in line with expectations. Chair Jerome Powell said that there'll be no rush to reduce rates amid uncertainty over tariff impact.
The Indian unit declined 39 paise to end at 84.83 a dollar on Wednesday, as geopolitical conflict worries increased after India destroyed nine terror bases in Pakistan under 'Operation Sindoor'. Phase 2 of the operation has begun.
"While India emphasised the targeted nature of the strike, Pakistan's warning of 'preparedness for an all-out war' has raised investor alarms. Foreign portfolio investors typically respond swiftly to such regional instability, prompting short-term rupee weakness," stated Amit Pabari, managing director at CR Forex Advisors.
The US Dollar Index, which measures the strength of the greenback against six major currencies, was up 0.55% at 99.98 and Brent Crude also recovered to trade at nearly $62 a barrel, up by 0.63%.
"This change in stance from confidence to caution has rattled investor sentiment and has caused dollar to gain some strength as markets price in a prolonged period of monetary uncertainty," Pabari noted.
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