The Indian Rupee ended the week on a weaker note, losing 18 paise to close at 85.45 against the US dollar. The domestic currency had opened stronger at 85.19 but soon lost its momentum, largely due to escalating geopolitical tensions with Pakistan. This led to a “risk-off” sentiment among traders, impacting both the currency and the stock market.

Geopolitical Tensions Impacting the Rupee

The rupee’s decline comes amid rising tensions between India and Pakistan, following a ceasefire violation across the Line of Control (LoC) by Pakistan. This was preceded by the Pahalgam terror attack, which resulted in the tragic deaths of 26 individuals, primarily tourists in Jammu and Kashmir. The escalation in hostilities between the two nations has heightened geopolitical risks, weighing on investor sentiment and causing a pullback in the rupee’s early gains.

Impact on the Stock Market

Alongside the rupee’s decline, the Indian stock market also experienced a slump, with the Sensex closing 0.71% lower at 79,227 and the Nifty down 0.86% at 24,039. Concerns around the India-Pakistan conflict and the broader geopolitical uncertainty led to a more cautious approach by investors, contributing to the broader market decline.

The Dollar Index and US-China Trade Talks

Meanwhile, the dollar index, which measures the strength of the US dollar against a basket of currencies, rose 0.32% to 99.69. The rise in the dollar came amid expectations of changes in the US-China trade dynamic. China is reportedly considering suspending its 125% tariff on certain US imports, which is likely to impact industries affected by the trade war. These developments are expected to influence the global forex market and further affect the Indian Rupee’s trajectory.

Meanwhile, the dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was up 0.32 per cent at 99.69, as of 3:35 PM IST. “Technically, the dollar index is approaching key levels—support sits at 99.00, while resistance looms at 100,” according to Amit Pabari, managing director at CR Forex Advisors. The rise in dollar value came as China is considering suspending its 125 per cent tariff on some US imports as the costs of the trade war weigh heavily on certain industries, Bloomberg reported, quoting sources.

Currency Outlook: 85.20 Support, 85.60 Resistance

Experts suggest that the rupee is likely to find support around 85.20, with resistance at 85.60. Any further escalation in geopolitical tensions could add pressure on the rupee, potentially pushing it closer to 85.80. Despite strong domestic fundamentals, the rupee remains vulnerable to foreign fund outflows, which could intensify volatility in the currency markets.

 Foreign portfolio investors (FPIs) continued to buy equities for the seventh consecutive day on Thursday. Global funds bought stocks worth ₹8,250.53, taking the seven-day purchase to ₹29,450.5 crore. Meanwhile, as of 3:30 PM, the Sensex closed 0.71 per cent or 570.8 points lower at 79,227, while the Nifty ended 0.86 per cent or 207.3 points lower at 24,039. 

FPI Inflows and Crude Oil Prices

Foreign Portfolio Investors (FPIs) have continued to buy equities, with inflows amounting to ₹8,250.53 crore on Thursday, marking the seventh consecutive day of purchases. However, concerns around the ongoing geopolitical situation may result in caution, potentially reversing the positive inflows. On the other hand, crude oil prices fell amid speculation over increased OPEC+ supply and uncertainty surrounding the US-China tariff talks. Brent crude oil was trading at $66.14 per barrel, while WTI crude stood at $62.42 per barrel.

Conclusion

The Indian Rupee faces near-term pressure due to rising geopolitical tensions with Pakistan, a stronger US dollar, and global economic uncertainties. Traders will be closely watching developments in the India-Pakistan situation, as well as any new movements in US-China trade relations, to gauge the direction of the rupee in the coming days. While the rupee’s long-term outlook remains positive, short-term volatility is likely as market participants react to geopolitical risks and changing global dynamics.