The India rupee is poised to decline at open on Wednesday after military action by India against Pakistan heightened cross-border tensions.
The 1-month non-deliverable forward indicated that the rupee will open at 84.64 to 84.68 to the U.S. dollar, down from 84.4325 in the previous session.
The initial market reaction "understandably" reflects caution and worries over the potential for a further escalation, a currency trader at a Mumbai-based bank said.
"With the situation unfolding, all focus will be on the news flow," he said.
"You can be sure the RBI (Reserve Bank of India) will intervene if there's any sign of disorderly moves," said a trader at a private bank.
The RBI can be "heavy handed with intervention today" to manage any extraordinary spike in volatility, Dhiraj Nim, FX strategist and economist at ANZ, said.
The rupee had not shown signs of stress over the India-Pakistan situation before this and that complacency might become a factor if the situation worsens, the trader at the Mumbai-based bank said.
India said it struck nine Pakistani sites that were "terrorist infrastructure" while Islamabad said six Pakistani locations were targeted.
India's offensive followed an attack by Islamist militants that killed tourists in Indian Kashmir last month for which it blamed Pakistan.
Pakistan termed the assault a "blatant act of war" and said it had informed the U.N. Security Council that Pakistan reserved the right to respond appropriately to Indian aggression.
ASIAN CUES
Asian currencies were mostly weaker on Wednesday, an added headwind for the rupee. The focus for regional currencies remains on news flow surrounding U.S. tariffs.
Investors are awaiting further details on trade deals the Trump administration is negotiating, particularly with China. On Sunday, U.S. President Donald Trump signalled that some agreements could be announced this week.
The 1-month non-deliverable forward indicated that the rupee will open at 84.64 to 84.68 to the U.S. dollar, down from 84.4325 in the previous session.
The initial market reaction "understandably" reflects caution and worries over the potential for a further escalation, a currency trader at a Mumbai-based bank said.
"With the situation unfolding, all focus will be on the news flow," he said.
"You can be sure the RBI (Reserve Bank of India) will intervene if there's any sign of disorderly moves," said a trader at a private bank.
The RBI can be "heavy handed with intervention today" to manage any extraordinary spike in volatility, Dhiraj Nim, FX strategist and economist at ANZ, said.
The rupee had not shown signs of stress over the India-Pakistan situation before this and that complacency might become a factor if the situation worsens, the trader at the Mumbai-based bank said.
India said it struck nine Pakistani sites that were "terrorist infrastructure" while Islamabad said six Pakistani locations were targeted.
India's offensive followed an attack by Islamist militants that killed tourists in Indian Kashmir last month for which it blamed Pakistan.
Pakistan termed the assault a "blatant act of war" and said it had informed the U.N. Security Council that Pakistan reserved the right to respond appropriately to Indian aggression.
ASIAN CUES
Asian currencies were mostly weaker on Wednesday, an added headwind for the rupee. The focus for regional currencies remains on news flow surrounding U.S. tariffs.
Investors are awaiting further details on trade deals the Trump administration is negotiating, particularly with China. On Sunday, U.S. President Donald Trump signalled that some agreements could be announced this week.
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