Rupee Marks Sharp Weekly Decline as India-Pakistan Tensions Escalate
The Indian rupee recorded a steep drop this week as tensions between India and Pakistan flared up, rattling domestic equities and sovereign bond markets. However, likely intervention by the Reserve Bank of India (RBI) on Friday offered some relief to the South Asian currency. The rupee ended Friday stronger at 85.37 per U.S. dollar, recovering from a near one-month low of 85.8425 hit earlier in the day, according to traders. Despite the day’s rebound, the currency posted a 0.9% loss over the week. The intensifying conflict has seen both nations accuse each other of launching fresh military strikes on Friday, involving drones and artillery fire for a third consecutive day — marking the most severe clashes in nearly 30 years. “Our current assessment is that both India and Pakistan have a fundamental incentive to avoid a major escalation over the medium term,” Michael Wan, senior currency analyst at MUFG, said in a note dated May 9. He added, “With geopolitical conflicts, it’s al...