On May 7, 2025, the Indian rupee took a hit, dropping 31 paise to 84.66 against the US dollar in early trading. This decline follows India’s military strikes on terrorist facilities in Pakistan and Pakistan-occupied Kashmir under Operation Sindoor, a response to the tragic Pahalgam attack that claimed 26 civilian lives two weeks ago. If you’re wondering how this geopolitical tension affects your finances—whether you’re an investor, traveller, or simply managing daily expenses—this blog breaks it down with actionable insights and updates. Let’s dive into the details!
The Backdrop: Operation Sindoor and Rising Tensions
India launched Operation Sindoor in the early hours of May 7, targeting nine terrorist sites, including the Jaish-e-Mohammad headquarters in Bahawalpur and Lashkar-e-Taiba’s base in Muridke. These precision strikes, executed with missiles and possibly drones, aimed to dismantle terror infrastructure linked to the April 22 Pahalgam attack, which killed 26 tourists, mostly Indian nationals. The operation has heightened tensions between India and Pakistan, with Pakistan vowing retaliation and reporting civilian casualties. At the same time, India insists the strikes were focused solely on terror targets, sparing Pakistani military facilities.
How the Rupee Reacted
The Indian rupee opened at 84.65 and slipped to 84.66 against the US dollar at the interbank foreign exchange, marking a 31-paise drop from its previous close of 84.35 on May 6. This follows a 5-paise decline on the last day, reflecting growing uncertainty as markets react to the military escalation. Posts on X highlight the rupee’s weakening in the Non-Deliverable Forwards (NDF) market, with some traders rotating out of riskier assets like Bitcoin and Ethereum amid the volatility.
Key Market Indicators
- Dollar Index: The dollar index, which tracks the US dollar against six major currencies, rose 0.30% to 99.53, signalling a stronger dollar and adding pressure on the rupee.
- Brent Crude Futures: Oil prices increased, with Brent crude futures gaining 0.68% to USD 62.57 per barrel. Rising oil prices often strain India’s import bill, further impacting the rupee since India relies heavily on imported oil.
Why the Rupee Is Under Pressure
Currency experts point to the heightened geopolitical risks as a primary driver of the rupee’s decline. The fear of conflict escalation between nuclear-armed neighbours India and Pakistan has rattled markets, prompting speculators and importers to buy dollars as a safe-haven currency. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, noted, “Speculators and worried importers might purchase dollars, increasing demand and pressuring the rupee.” Additionally, the Indian stock market felt the heat—Gift Nifty crashed 436 points (1.78%) to 24,125, signalling a lower opening for Sensex and Nifty, as per posts on X. Bhansali also highlighted potential selling by Foreign Institutional Investors (FIIs) in equity markets. However, they may hold off until further developments emerge.
What’s the RBI Doing About It?
The Reserve Bank of India (RBI) is expected to step in to curb the rupee’s fall. Bhansali predicts, “The RBI will intervene to prevent any significant rupee decline, controlling market volatility.” Historically, the RBI has used its foreign exchange reserves—currently at USD 688 billion as of April 2025 (per RBI data)—to stabilize the currency during turbulent times. This intervention could involve selling dollars to increase the rupee supply, helping to cap the depreciation. For real-time updates on the rupee’s movement, you can track live forex rates on XE.com.
How This Impacts You
The rupee’s decline isn’t just a number—it affects various aspects of your life:
- Travel and Education Abroad: A weaker rupee means higher costs for international travel, studying abroad, or sending money overseas. For example, if you’re planning a trip to the US, your expenses in dollars will now cost more in rupees.
- Imports and Inflation: India imports essentials like oil and electronics. A falling rupee increases import costs, which could lead to higher prices for fuel, gadgets, and even daily goods. Keep an eye on fuel prices in your city via IndianOil.in.
- Investments: If you’re invested in Indian stocks, the market’s volatility (Sensex and Nifty opened lower) might affect your portfolio. FII selling could further pressure stock prices, so diversify your investments or consult a financial advisor.
- Exporters: Conversely, a weaker rupee benefits exporters, as their dollar earnings translate to more rupees. If you run an export business, this could be a silver lining.
What to Expect Next
Markets are likely to remain jittery as the situation unfolds. Bhansali suggests that the rupee’s trajectory will depend on the RBI’s actions and any further escalation in India-Pakistan tensions. If the conflict remains a short-term event (24–48 hours), as some market analysts hope, the rupee and markets may stabilize quickly. However, a prolonged standoff could lead to sustained volatility. Global factors, like the rising dollar index and Brent crude prices, will also play a role. For deeper insights into currency trends, check out Investopedia’s guide on forex trading.
Your Thoughts?
How are you navigating this market volatility? Are you adjusting your travel plans, investments, or business strategies due to the rupee’s decline? Share your experiences in the comments—we’d love to hear from you! Stay informed with the latest financial news on Moneycontrol.