The Indian Rupee struggled once again to break past the crucial 85 mark on Friday, following a sell-off in local equities and bonds as investors assessed the potential for heightened geopolitical uncertainty after a deadly militant attack.
The Rupee, which reached a high of 85.10 during the session, fell to 85.6550 against the US Dollar.
This marks the third time in recent days that the Indian currency has been pushed back from the 85 level.
India’s Nifty 50 Index declined more than 1%, significantly lagging behind other Asian equity indices, which followed the upward trend set by their US counterparts, Reuters news agency reports.
“The 84.90-85 level has always been a tough barrier to break, and given the current downturn in equities, it’s understandable why USD/INR has moved higher,” according to a currency trader at a bank.
He noted that Indian equities had largely overlooked the Kashmir attack until now, but that has shifted, and it doesn’t bode well for the Rupee in the short term.
Furthermore, Indian bonds also fell alongside equities, causing the yield on the 10-year bond to rise by 4 basis points.
India has stated that Pakistani elements were involved in Tuesday’s attack, where militants shot 26 men in a meadow in the Pahalgam area. Islamabad has denied any involvement.
The nuclear-armed nations have taken a series of retaliatory measures, with India suspending a crucial river water-sharing treaty and Pakistan closing its airspace to Indian airlines, among other actions.
India’s army chief is set to review security measures on Friday and visit the site of a deadly attack on tourists.