Forex market dealers said RBI did not intervene in the market to stem the fall in the rupee
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REUTERS
The sentiment in the forex market turned bearish on Thursday in the backdrop of escalating conflict between India and Pakistan, with the rupee witnessing the biggest single day drop in over two years. A strong dollar also weighed on the Indian currency.
The rupee closed 88 paise down at 85.71 per dollar against previous close of 84.83. Opening a tad stronger at 84.79 per dollar, the dollar-rupee pair touched a high/low of 85.97/84.67. Overall, the rupee saw a huge intra-day movement of about 130 paise.
Arvind Kanagasabai, Executive Vice President-Integrated Treasury, Tamilnad Mercantile Bank, observed that news of escalation in the Indo-Pak conflict around 11.30 am or so, triggered nervousness in the equity markets, which, in turn, had a ripple impact on the rupee.
Moreover, the dollar index too strengthened against major currencies.
Repo rate cut
Kanagasabai assessed that if the monetary policy committee cuts the repo rate further by 25 basis points, it will have a depreciating effect on the rupee.
Forex market dealers said RBI did not intervene in the market to stem the fall in the rupee.
Wild swing
Amit Pabari, MD, CR Forex Advisors, noted that the dollar-rupee saw a wild swing amid geopolitical escalation and stop-loss triggers.
“The dollar-rupee pair experienced one of its sharpest intraday moves in recent history…This dramatic depreciation in the rupee was largely fuelled by intensifying geopolitical tensions between India and Pakistan, following escalating developments along the border.
“Adding to the pressure, stop-losses of major importers were triggered as the rupee weakened, resulting in a sudden surge in dollar buying that magnified the rupee’s decline,” Pabari said.
The move marked the sharpest intraday swing since March 27, 2020, when the pair moved ₹1.08, and April 7, 2021, with a 1.0475 rupee change.
Pabari assessed that technically, the dollar-rupee pair now eyes resistance at 85.80–86.00, while near-term support is at 85.00. The near-term outlook remains volatile, driven by geopolitical tensions.
Published on May 8, 2025
