Rupee’s Rollercoaster: From Six-Month Highs to Crisis Lows as Conflict Fears Grip Investors

The Indian rupee opened weaker at 85.8100 per US dollar on Friday, falling from its last close of 85.7100, as global and domestic factors converge to challenge the currency's strength.

 

Geopolitical Tensions Weigh on Sentiment

The rupee's fall comes after increased tensions between Pakistan and India, with recent cross-border raids leading investors to demand safer assets. Geopolitical uncertainty has fueled greater volatility in Indian markets that reversed some of the currency's previous gains this year.

 

Recent Performance and Volatility

Having touched a six-month high of 85.2 per dollar earlier this month, the rupee has fallen back as risk aversion increases. Though this pullback, the rupee is still stronger than at the beginning of the year, supported by strong foreign inflows and resilient domestic growth prospects.

 

Oil Prices and Trade Balance

A steep decline in international oil prices, courtesy of increased OPEC+ production, has supported the rupee's decline by softening India's import bill. This has saved the rupee from sharper outflows despite the overall global macroeconomic environment being in limbo.

 

Forecast and Outlook:

Analysts predict the rupee to stay in the 85–87 band against the US dollar until 2025, with stability depending on external events such as US Federal Reserve policy and additional geopolitical events. The currency is predicted to trade at around 84.92 towards the end of this quarter, with a 12-month forecast at 85.69.

 

Investor Watch:

Market players are watching closely, with any increase in local tensions or changes in global risk appetite set to spark further action in the rupee.

 

Sources: Trading Economics, DD News, Exchange Rates UK