MUMBAI: The Indian rupee yet again failed to move past the psychological 85 mark on Friday after a sell-off in local equities and bonds amid investors weighing the potential for increased geopolitical uncertainty following a deadly militant attack.
The rupee, having peaked at 85.10 during the session, dropped to 85.6550 versus the U.S. dollar.
This is the third time in recent days that the Indian currency has been driven back from the 85 level.
India’s Nifty 50 Index dropped over 1%, significantly underperforming other Asian equity indices, which followed their U.S. peers higher.
The 84.90-85 level was always a tough barrier to break, and with the current drawdown in equities, it’s understandable why USD/INR has seen a move higher, a currency trader at a bank said.
He pointed out that Indian equities had largely ignored the Kashmir attack until now. That has changed and does not bode well for the rupee in the near term, he added.
Indian rupee falls amid rising tensions with Pakistan after Kashmir attack
Indian bonds declined alongside equities, pushing the yield on the 10-year up by 4 basis points.
Pakistan, India stand off
India has said there were Pakistani elements in Tuesday’s attack, when militants shot 26 men in a meadow in the Pahalgam area. Islamabad has denied any involvement.
The nuclear-armed nations have unleashed a raft of measures against each other, with India keeping a critical river water-sharing treaty in abeyance and Pakistan closing its airspace to Indian airlines, among other steps.
India’s army chief will review security arrangements on Friday and visit the site of a deadly attack on tourists.
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