MUMBAI: The Indian rupee weakened on Wednesday to log its worst single-day decline in a month as worries over an escalation in geopolitical conflict between India and Pakistan hit sentiment alongside a fall in Asian peers.
The Indian rupee closed lower by nearly 0.5% at 84.8250 against the U.S. dollar, marking its worst performance since April 9.
The rupee is likely to keep facing intermittent pressure depending on how the situation evolves, a trader at Singapore-based hedge fund said.
In the near-term, bullish bets on the currency could be scaled back while the Reserve Bank of India may step in to limit sharp swings, the trader said.
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During the day, the rupee’s losses were curbed on the back of dollar selling interest from a large conglomerate near the 84.90 level and on intermittent offers from state-run banks, a trader at a Mumbai-based bank said.
Asian currencies were lower on the day, with the offshore Chinese yuan declining to 7.22 and the Indonesian rupiah down 0.5%.
“Risk appetite in part will have been curtailed following India’s decision to attack Pakistan close to the border with Kashmir … Pakistan has also retaliated, leaving the risk of conflict elevated,” MUFG Bank said in a note.
India’s benchmark equity indexes, the BSE Sensex and Nifty 50, swung between gains and losses before ending slightly in the green while the benchmark 10-year bond yield dipped to 6.3381%.
Investors await the Federal Reserve’s policy decision due later in the day. No changes to benchmark interest rates are expected.
American Dollar Exchange Rate