Indian rupee likely to weaken more on widening India-Pakistan conflict
MUMBAI: The Indian rupee looks set to decline further on Friday, pressured by the widening conflict between India and Pakistan that may trigger increase hedging and speculative activity.
The 1-month non-deliverable forward indicated that the rupee will open at 85.80 to 85.90 to the U.S. dollar compared with 85.71 in the previous session.
The rupee on Wednesday slumped 1.04%, recording its worst session in more than two years.
The currency came under pressure in the afternoon session after India reported Pakistan's attempts to engage military targets.
'Until yesterday afternoon, markets had largely priced in a view that there would be no meaningful worsening in India-Pakistan tensions,' a currency trader at a Mumbai-based bank said.
'That assumption is now being reassessed, and positioning in the rupee will likely need to be adjusted accordingly,' and it may lead to a pick-up in hedging and speculative activity, the trader said.
Pakistan and India accused each other of launching drone attacks on Thursday, and Islamabad's Defense Minister said further retaliation was 'increasingly certain'.
India said military stations were attacked by Pakistani drones and missiles.
Indian equities were set to open more than 1% lower. In the two sessions following the rise in tensions, the activity of foreign investors indicates that they largely held the view that the situation would not have a lasting impact on the Indian economy, analysts said.
Indian rupee, shares, bonds drop on signs of escalation in India-Pakistan conflict
Preliminary data showed that foreign investors were net buyers of Indian equities on Thursday, after buying approximately $350 million on Wednesday.
'It will be interesting to see how the numbers pan out in today's session. There's a sense that the landscape has shifted,' said Kunal Kurani, Assistant Vice President at Mecklai Financial.
Other Asian currencies largely weakened on Friday, while the U.S. dollar rose against its major counterparts, creating additional headwinds for the rupee.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
Malaysia's palm oil stocks hit 8-month high in May as output jumps
KUALA LUMPUR: Malaysia's palm oil stocks jumped to their highest level in eight months in May as a surge in production and imports countered exports, which rose to their highest in six months, data from the industry regulator showed on Tuesday. Palm oil stocks rose 6.65% month-on-month in May, the third consecutive monthly increase, to 1.99 million metric tons, the highest since September 2024, the Malaysian Palm Oil Board (MPOB) said. Crude palm oil production climbed 5.05% in May, also the third straight monthly rise, to 1.77 million tons, while palm oil exports surged 25.6% to 1.39 million tons, the highest since November last year, the MPOB said. Imports rose to 68,971 tons last month from 58,292 tons in April, the data showed. A Reuters survey had estimated inventories at 2.01 million tons, with output at 1.74 million tons and exports at 1.3 million tons. The MPOB report is slightly bullish for palm oil, as the market was already trading with the expectation of stocks rising to 2 million tons, said Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group. Palm rises on stronger Dalian rivals but weak Chicago soyoil limits gains 'Unless production rises with greater force in (the) coming months, we expect demand, particularly from top buyer India, to support the market.' Earlier this month, India halved the basic import tax on crude palm oil to 10% to bring down food prices and help the local refining industry. Palm oil has been trading at a discount to rival soyoil for the last few weeks and has started to lure buyers during the peak production season, said a Mumbai-based dealer with a global trade house.
Business Recorder
2 hours ago
- Business Recorder
Pakistan economy witnesses stability: Tarar
LAHORE: Minister for Information and Broadcasting Attaullah Tarar has said the country's economy has witnessed stability due to prudent policies of the government. 'The government's entire focus is now on economy,' Tarar said, adding: 'Pakistan has achieved great success under the dynamic leadership of Prime Minister Shehbaz Sharif and Field Marshal Syed Asim Munir, Chief of Army Staff.' Talking to media, Tarar said a befitting response was given to the Indian blatant aggression against Pakistan due to the comprehensive strategy of the Field Marshal. He said the friendly countries also extended full support to Pakistan during Pak-India tension. Attaullah Tarar said Pakistan has made significant progress at diplomatic front and the entire world acknowledged Pakistan's success. Regarding the Prime Minister's recent visit to Saudi Arabia, he termed it highly successful. He said the Prime Minister during the Eid days, held telephonic conversations with leaders of different Muslim countries and to extend them warm Eid greetings. He added the Prime Minister also telephoned political leadership of the country, including the Governors, the Chief Ministers and the Federal Ministers and extended warm Eid greetings to them. Moreover, Prime Minister Shehbaz Sharif Sunday held a telephonic conversation with Federal Minister for Overseas Pakistanis and Human Resource Development Chaudhry Salik Hussain. The PM extended heartfelt Eid-ul-Azha greetings to the federal minister. He also conveyed special Eid wishes for Pakistan Muslim League-Q President Chaudhry Shujaat Hussain. He inquired about Chaudhry Shujaat's health and prayed for his swift recovery, expressing his sincere well wishes. Chaudhry Salik Hussain, in return, conveyed Eid-ul-Azha greetings to Prime Minister Shehbaz Sharif and thanked him for his sentiments. Copyright Business Recorder, 2025
Business Recorder
2 hours ago
- Business Recorder
Pakistan likely to hike defence spending but slash overall budget in 2025-26
ISLAMABAD: Pakistan will unveil its annual federal budget for the coming fiscal year later on Tuesday, seeking to kickstart growth while finding resources for an expected hike in defence expenditure following the conflict with India last month. Islamabad will also have to contend with remaining within the discipline of its International Monetary Fund programme and the uncertainty from new trade tariffs being imposed by the United States, its biggest export market. Media reports say the government is likely to present a 17.6 trillion rupee ($62.45 billion) budget for the fiscal year beginning July 1, down 6.7% from this fiscal year. It has projected a fiscal deficit of 4.8% of GDP, against a targeted 5.9% deficit in 2024-25, the reports say. Analysts said they expect an increase of around 20% in the defence budget, likely offset by cuts in development spending. Pakistan allocated 2.1 trillion Pakistani rupees($7.45 billion) for defence in the outgoing fiscal year, including $2 billion for equipment and other assets. An additional 563 billion rupees ($1.99 billion) was set aside for military pensions, which are not counted within the official defence budget. India's defence spending in its 2025–26 (April-March) fiscal year was set at $78.7 billion, a 9.5% increase from the previous year, including pensions and $21 billion earmarked for equipment. It has indicated it will step up expenditure following the May conflict with Pakistan. The government of Pakistani Prime Minister Shehbaz Sharif has projected 4.2% economic growth in 2025-26, saying it has steadied the economy, which had looked at risk of defaulting on its debts as recently as 2023. Growth this fiscal year is likely to be 2.7%, against an initial target of 3.6% set in the budget last year. Economic Survey 2024-25: Pakistan misses growth target Pakistan's growth lags far behind the region. In 2024, South Asian countries grew by an average of 5.8% and 6.0% growth is expected in 2025, according to the Asian Development Bank. Rate cuts not enough Expansion of the economy should be aided by a sharp drop in the cost of borrowing, the government says, after a succession of interest rate cuts by the central bank. But economists warn that monetary policy alone may not be enough, with fiscal constraints and IMF-mandated reforms still weighing on investment. Finance Minister Muhammad Aurangzeb said on Monday that he wanted to avoid Pakistan's boom and bust cycles of the past. 'The macroeconomic stability that we have achieved, we want to absolutely stay the course,' he said. 'This time around we are very, very clear that we do not want to squander the opportunity.' The budget is expected to prioritize expanding the tax base, enforcing agriculture income tax laws, and reducing government subsidies to industry, to meet the terms of a $7 billion IMF bailout signed last summer. Just 1.3% of the population paid income tax in 2024, according to the tax authorities, with agriculture and the retail sector largely outside of the tax net. The IMF has urged Pakistan to widen the tax base through reforms which include taxing agriculture, retail, and real estate. Ahmad Mobeen, senior economist at S&P Global Market Intelligence, said that he expected the revenue target for 2025-26 will be missed. 'The shortfall will mostly be owing to lack of optimal implementation of announced measures as well as absence of meaningful structural reforms to widen the tax net in general,' said Mobeen.
