Rupee fall may be transient, conflict clouds outlook

Economists expect the impact of the Indian rupee's sharp drop against the US dollar to be short-lived, despite concerns over inflation, foreign investment, and fiscal stability, as escalating India-Pakistan tensions, a strengthening US dollar, and a market sell-off drive the currency's decline.

- Rhik Kundu

NEW DELHI:

At the same time, they warned that things could take a turn for the worse if the conflict with Pakistan lingers.

The rupee's 88-paise drop on Thursday marked its steepest one-day fall in more than two-and-a-half years. On Friday, it opened 0.2% lower at 85.85 against the US dollar, and then depreciated 15 paise to 85.869 in early trade. In comparison, the rupee stood at 83.51 against the dollar a year ago (9 May 2024), according to Bloomberg data.