Mumbai: The rupee depreciated 31 paise to 84.66 against the US dollar in early trade on Wednesday. This came after India's military strikes against terrorist camps in Pakistan and Pakistan-Occupied Kashmir increased cross-border tensions.
Forex traders said the military strikes against terrorist camps in Pakistan and Pakistan-Occupied Kashmir highlight the escalation of conflict onto the rupee.
Amid growing uncertainty and a cautious recalibration of risk appetite, at the interbank foreign exchange, the domestic unit opened at 84.65 and fell to 84.66 against the greenback, registering a loss of 31 paise over its previous close. On Tuesday, the rupee settled for the day 5 paise lower at 84.35 against the US dollar.
Indian armed forces on early Wednesday carried out missile strikes on nine terror targets in Pakistan and Pakistan-Occupied Kashmir including the Jaish-e-Mohammad stronghold of Bahawalpur and Lashkar-e-Taiba's base in Muridke.
"There could be some dollar buying by speculators and panicky importers but we think the Reserve Bank of India (RBI) will be present to stop any major slide of the rupee," Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.30 per cent at 99.53.
Bhansali further said, "We expect there could be some selling by FII in the equity markets though that could be subdued as they would want to wait for further news of escalation to filter down.
"Markets today are likely to be nervous and a bit volatile, but as we said earlier, it would depend on RBI to control the market volatility and they will determine where the rupee ends today."
The military strikes were conducted under Operation Sindoor two weeks after the Pahalgam attack that killed 26 civilians.
Brent crude, the global oil benchmark, rose 0.68 per cent to USD 62.57 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex declined 107.74 points, or 0.13 per cent, to 80,533.33, while the Nifty fell 24.35 points, or 0.10 per cent, to 24,355.25.
Foreign institutional investors (FIIs) bought equities worth Rs 3,794.52 crore on a net basis on Tuesday, according to exchange data.
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