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Informist, Thursday, May 8, 2025

By Sourabh Kumar

MUMBAI – The rupee sank against the dollar Thursday, falling the most in over two years as tension between India and Pakistan escalated, dealers said. Escalation in military actions between the two neighbours pushed the rupee down 89 paise Thursday, the most since Feb. 6, 2023.

"It was all India-Pakistan today," a dealer with a foreign-owned bank said. "Everyone was just buying after the news came in that India had attacked some places."

The rupee ended the day at 85.71 a dollar, sharply down from 84.8250 a dollar. It fell over 1% against the greenback Thursday, the most among all Asian currencies.

Due to an increase in intensity of military actions between the nuclear-armed neighbours, market participants feared that the "situation could escalate further and that led to a lot of panic buying (of dollars)," a dealer with a private bank said.

Thursday morning Indian armed forces targeted air defence radars and systems at several locations in Pakistan and neutralised at least one air defence system in Lahore, the Indian defence ministry said in a release. "The Indian response has been in the same domain with the same intensity as Pakistan," the ministry said. "It has been reliably learnt that an Air Defence system at Lahore has been neutralised."

The ministry said Pakistan has increased the intensity of "unprovoked firing" across the Line of Control, and have used mortars and heavy calibre artilleries to target multiple areas. "Here too, India was compelled to respond to bring mortar and artillery fire from Pakistan to a halt," the ministry said.

After opening sharply higher at 84.6400 a dollar, the rupee held its ground against the greenback for a few hours. The Indian currency remained higher against the dollar for almost three hours after open, but then it came under extreme pressure as importers, among other corporates, increased their dollar purchases, dealers said. 

Initially the rupee came under pressure due to a rise in the dollar index, leading to demand for dollars by importers, dealers said. The demand for dollars increased on expectation that the US currency may get stronger after the US announces a trade deal later Thursday. US President Donald Trump is scheduled to hold a press conference later Thursday, where he is expected to announce a trade deal with a country. Mentioning the timing of the press conference on his Truth Social handle, Trump said, "This should be a very big and exciting day for the United States of America and the United Kingdom." 

The dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.16 at 1530 IST, up from 99.87 Wednesday and 99.40 Tuesday.

Market participants further increased their dollar buying as they took note of some news reports about an escalation in India-Pakistan tensions, dealers said. Before the official announcement from Indian government, several news reports hinted at increased cross-border military engagement between the two countries.

Consequently, multiple stop-losses were hit on short dollar bets, first as the rupee fell below 84.95 a dollar and then after 85.10 a dollar, dealers said. It continously pushed the rupee lower against the dollar.

"There were some selling in the morning by foreign banks, but as this news took over the market, they bought a lot of dollars, bringing the dollar/rupee above yesterday's (Wednesday) high (84.93 a dollar)," a dealer with a private sector bank said. "Later, a lot of stop losses got hit, and the move was in just one direction. The central bank was also not seen today."

Some foreign banks purchased the greenback on behalf of their overseas clients, who withdrew money out of Indian financial markets on fear of a more intense conflict between India and Pakistan, dealers said. As most market participants turned dollar buyers, the rupee slumped to hit over a three-week low of 85.77 a dollar in the last half an hour of trade.

After the Indian currency hit the day's low, a lot of exporters jumped to sell dollars, taking advantage of lucrative levels, dealers said. It limited the fall in the Indian currency. Noting the sharp downward movement in the rupee during the day, some exporters still waited for the Indian unit to fall further before selling dollars in large quantum, dealers said.

However, the Reserve Bank of India did not intervene to smoothen the volatility in the currency market, dealers said. During the day, the rupee moved the most in over a decade. On Thursday, the Indian currency moved in a range of 1.25 rupees, the most since Sept. 6, 2013, when it had moved 1.30 rupees against the dollar.

FORWARDS

Dollar/rupee forward premiums also surged due to escalation in tensions between India and Pakistan, dealers said. The one-year exact-period dollar/rupee forward premium hit a one month high of 2.36% on an annualised basis on Thursday. Market participants expect forward premium to rise further, should relations between India and Pakistan worsen, dealers said.

At 1530 IST, the one-year exact-period dollar/rupee forward premium was 2.36%, sharply higher from 2.20% Wednesday. On absolute basis, the premium was 201.97 paise, up from 187.98 paise Wednesday.

The one-year dollar/rupee forward premium had fallen earlier in the day, tracking a rise in the benchmark 10-year US Treasury yield, dealers said. Before surging, the one-year forward premium had hit near a week-low of 2.15% as yield on the 10-year US Treasury note rose to 4.32% in European trade Thursday after closing at 4.26% Wednesday. 

The US Treasury yield moved higher ahead of Trump's press conference, scheduled in a few hours. He is expected to announce a trade deal, according to a post by Trump on Truth Social. 

OUTLOOK

On Friday, the rupee will take cues from any developments on India-Pakistan border, dealers said. A further military action by either country is likely to weigh on the Indian currency, dealers said. The Indian rupee will also take cues from the movement in the Chinese yuan, dealers said. 

Continuing India-Pakistan conflict may keep foreign portfolio investors away from Indian financial markets, weighing on the rupee, dealers said. It may also lead to foreign fund outflows from the stock market, weighing on the Indian currency, dealers said.

However, exporters are likely to sell dollars at relatively higher dollar/rupee levels, which may limit the fall in the rupee, dealers said. During the day, the rupee is seen moving in a range of 85.00 and 86.00 a dollar. They peg immediate technical support for the rupee at 85.80 a dollar.

India Rupee - World FX: Dlr index up before Trump's comments on trade deal

NEW DELHI – The dollar index rose on Thursday after US President Donald Trump said he would announce "a major trade deal" later in the day. Trump said in a post on his Truth Social platform he would hold a press conference about a "major trade deal with representatives of a big, and highly respected, country," adding that it would be the "first of many". Last week, Trump said he had "potential" trade deals with India, South Korea and Japan.

Investors are also await planned talks between the US and China in Switzerland on Saturday, which could mark the first step in dialling down the trade war between the world's top two economies. At 1705 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was 100.08 from 99.87 Wednesday and 99.40 Tuesday. 

The US Federal Open Market Committee Wednesday unanimously voted to keep the federal funds target rate range unchanged at 4.25-4.50% for the third straight meeting, as widely expected. Fed Chair Jerome Powell said the central bank cannot make preemptive policy decisions until there is clarity about where the economy is headed.

The euro was down 01% against the greenback, tracking a rise in the dollar index. German conservative leader Friedrich Merz was elected chancellor by Parliament on Tuesday in a second round of voting after an unprecedented defeat on the first attempt, as per reports. 

The pound sterling was up 0.2% against the US unit ahead of the Bank of England's policy decision due later in the day, where it is expected to cut rates by 25 bps.  

The Japanese yen was down 0.7% against the greenback, while both the Australian dollar and the New Zealand dollar were down 0.1% each. (Pratiksha)

India Rupee: Premium rises on fear of escalation in India-Pakistan tensions

MUMBAI – The one-year dollar/rupee forward premium rose as banks purchased forward dollars due to fear of further escalation in tensions between India and Pakistan, dealers said. The Indian government said it had targeted air defence systems at several locations in Pakistan Thursday. 

"Right now, any news regarding India-Pakistan is moving the market, and people are now fearful of a further escalation," a dealer at a brokerage firm said.

The rupee slumped in the spot market on Thursday due to fears that more military action could follow from both India and Pakistan, dealers said.

Before banks started buying forward dollars aggressively, the one-year dollar/rupee forward premium had fallen because of a rise in the benchmark 10-year US Treasury yield Thursday. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Banks' forward dollar purchases pushed the one-year dollar/rupee premium to a week's high of 2.28%. Market participants expect forward premium to rise further, should relations between India and Pakistan worsen, dealers said. The one-year exact-period dollar/rupee forward premium was 194.60 paise at 1508 IST, up from 187.98 paise Wednesday. It was at 2.27%, up from Wednesday's 2.20%.  (Sourabh Kumar)

India Rupee: Sharply down as dlr index up; stop losses hit on short dlr bets

MUMBAI – The rupee fell sharply below 85 a dollar as multiple stop-losses were triggered on short dollar bets, dealers said. Stop losses on short-dollar bets were triggered as the rupee fell due to a rise in the dollar index, dealers said.

"There were stop losses after it (rupee) crossed 95 levels, and then near the figure (85 a dollar)," a dealer with a foreign bank said. "If you see dollar index has risen above 100, so that is weighing on rupee, consequently buying is coming in from everyone."

After opening at 84.6400 a dollar, sharply higher from Wednesday's close of 84.8250 a dollar, the rupee remained higher for an hour or so. Later, importers and other corporates increased their dollar purchases on expectation that the dollar index will strengthen further, dealers said. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was 100.10 at 1304 IST, up from 99.87 Wednesday and 99.40 Tuesday. 

The dollar index rose in early European trade before the news briefing of US President Donald Trump later in the day, where he is scheduled to announce trade deal with a country. He notified of the briefing on his Truth Social handle. "If a trade deal is announced today, we may see the dollar strengthening for some time, and that is going to be bad for the rupee," a trader at a brokerage firm said. "But, we will have to wait for a while because people's confidence on US assets haven't improved yet."

A few dealers said some foreign banks also bought the greenback, probably for foreign fund outflows, which weighed on the rupee. Consequently, the Indian currency fell to 85.0650 a dollar, the lowest in a week. At such lucrative levels, exporters sold dollars, which limited the fall in the Indian currency, dealers said. While a few dealers speculated that the Reserve Bank of India might have sold dollars to prevent runaway depreciation of the Indian currency, others did not confirm the same.

During the day, the rupee is seen moving between 84.70 and 85.25 against the dollar. Dealers see strong technical resistance at 85.10 a dollar.  (Sourabh Kumar)

India Rupee: Technical levels for rupee - May 8

MUMBAI – At 1054 IST, the rupee was at 84.6950 per dollar. At 0900 IST, the rupee was at 84.6400 a dollar, against the previous close of 84.8250. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar)

India Rupee - Asia FX: Mixed as markets focus on US-China trade talks

MUMBAI – Asian currencies were mixed against the dollar Thursday as market participants awaited the outcome of US-China trade talks over the weekend, after the US Federal Open Market Committee decided to keep the federal funds target range unchanged at 4.25-4.50%. The dollar index, which measures the strength of the dollar against a basket of six major currencies, fell to 99.66 at 0945 IST from 99.87 Wednesday, but was up from 99.40 Tuesday.

The FOMC took note of the evolving trends in the world's largest economy after US President Donald Trump's sweeping tariffs were announced in April. "Uncertainty about the economic outlook has increased further," the FOMC statement said. "The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen." The committee did not directly mention the tariffs.

"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the statement said. Market participants now await trade talks between US and China, when their officials meet in Switzerland this weekend. 

The Malaysian ringgit was down 0.6% against the greenback ahead of the Bank Negara Malaysia's rate decision, due later in the day. The central bank is expected to keep the benchmark rate unchanged. The fall in the currency was limited as data showed Malaysia's industrial production rose sharply in March. Industrial production rose 3.2% on year, up from 1.5% in February. The reading was also higher than the expectation of 2.0% rise in a Reuters poll.

The South Korean won fell 0.2% after minutes of Bank of Korea's latest meeting showed there might be rate cuts in subsequent meetings. One of the board members said there was a growing need to cut rates sooner due to expectations of a slowdown in the country's economic growth this year. In April, the central bank had maintained the benchmark rate at 2.75 and signalled a rate cut in May. Bank of Korea will meet on May 29 to decide on interest rates.

The Philippines peso fell 0.2% after the nation's economic growth fell short of expectations. Philippines' GDP growth in the March quarter was 5.4%, slightly lower than 5.55% expected in a poll by The Wall Street Journal. The Indonesian rupiah, the Thai baht, and the Taiwan dollar were up 0.6%, 0.5%, and 0.1%, respectively against the dollar.  (Sourabh Kumar)

India Rupee: Surges as bks sell dlrs for FX inflows; importer buys cap gains

MUMBAI – The rupee opened sharply higher against the dollar as some foreign banks sold the greenback, likely for foreign fund inflows into domestic financial markets, dealers said. Some importers purchased the greenback, which limited the gains in the Indian currency, dealers said.

"There is some selling from foreign banks, and it appears to be flows, though it would be clear only after 0930 IST," a dealer with a foreign bank said. Some exporters also sold the greenback, noting a relatively higher dollar/rupee levels, dealers said. However, most of them waited for the rupee to fall further before selling the greenback in large quantum, dealers said.

The rupee also found support from a weak dollar. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 99.64 at 0914 IST, down from 99.87 from Wednesday, but up from 99.40 Tuesday. The dollar index was little changed after the US Federal Open Market Committee kept the federal funds target rate range unchanged at 4.25-4.50%. The committee's comments took note of the evolving trends in the world's largest economy after US President Donald Trump's sweeping tariffs were announced in April. 

While a few importers bought dollars, which capped gains for the rupee, most waited for it to rise above 84.50 a dollar before buying the greenback in large quantum, dealers said. Market participants have kept an eye on developments between India and Pakistan, and any news indicating deterioration in relations could weigh on the currency, dealers said. The Reserve Bank of India is expected to intervene in the currency market by selling dollars only if the rupee falls sharply and quickly, dealers said.

Market participants now await the news conference by Trump later in the day about a major trade deal. Trump posted Wednesday on Social Truth platform that the news conference at the Oval Office concerns a "major trade deal with representatives of a big, and highly respected, country. the first of many!" Market participants would also keenly await the outcome of US-China trade talks this weekend.

During the day, the rupee is seen moving between 84.30 and 84.80 against the dollar. Dealers see strong technical resistance at 84.40 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - May 8

MUMBAI – Following are the expected support and resistance levels for the rupee on Thursday, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar and Pratiksha)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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