Mumbai, Apr 24 (PTI) The rupee depreciated 22 paise to 85.67 against the US dollar in early trade on Thursday, weighed down by negative domestic equities amid significant geopolitical escalation that has injected fresh uncertainty into the regional risk perception.
Forex traders said heightened geopolitical tensions, following a terror attack in Pahalgam, Jammu & Kashmir weighed on market sentiment.
On the global front, the US dollar index surged from its recent low of 97.92 to 99.94, marking a notable comeback driven by optimism around a potential de-escalation in US-China trade tensions, they added.
At the interbank foreign exchange, the domestic unit opened at 85.60 and fell to an intraday low of 85.67 against the greenback, registering a loss of 22 paise over its previous close.
On Wednesday, the rupee depreciated 26 paise and settled for the day at 85.45 against the US dollar.
“Historical patterns suggest that such events initially trigger rupee depreciation due to risk aversion. During the 2016 Uri and 2019 Pulwama attacks, the rupee weakened initially but rebounded following decisive Indian responses, underscoring that investor confidence hinges on India’s strategic stance post-incident,” CR Forex Advisors MD Amit Pabari said.
India on Wednesday downgraded diplomatic ties with Pakistan and announced a raft of measures, including expulsion of Pakistani military attaches, suspension of the Indus Water Treaty of 1960, and immediate shutting down of the Attari land-transit post in view of the cross-border links to the horrific Pahalgam terror attack that killed 26 civilians.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.17 per cent at 99.67.
Brent crude, the global oil benchmark, rose 0.09 per cent at USD 66.21 per barrel in futures trade.
“The near-term rupee outlook remains clouded by dollar strength and rising uncertainties. Technically, the rupee is likely to face support at the 85.20 level and resistance at the 85.50 level; a breach of the resistance could pave the way towards 85.80 levels,” Pabari said.
In the domestic equity market, the 30-share BSE Sensex slumped 281.71 points or 0.35 per cent to 79,834.78, while the Nifty fell 77.70 points or 0.32 per cent to 24,251.25.
Foreign institutional investors (FIIs) bought equities worth Rs 3,332.93 crore on a net basis on Wednesday, according to exchange data.
