The weakened on Wednesday to log its worst single-day decline in a month as worries over an escalation in geopolitical conflict between India and Pakistan hit sentiment alongside a fall in Asian peers.
India said it had struck nine Pakistani “terrorist infrastructure” sites, some of them linked to an attack by militants on tourists that killed 26 people in Indian Kashmir last month.
Pakistan said it had shot down five Indian fighter jets in the worst fighting in more than two decades between the nuclear-armed neighbors.
The Indian rupee closed lower by nearly 0.5% at 84.8250 against the U.S. dollar, marking its worst performance since April 9.
The rupee is likely to keep facing intermittent pressure depending on how the situation evolves, a trader at Singapore-based hedge fund said.
In the near-term, bullish bets on the currency could be scaled back while the may step in to limit sharp swings, the trader said.
During the day, the rupee’s losses were curbed on the back of dollar selling interest from a large conglomerate near the 84.90 level and on intermittent offers from state-run banks, a trader at a Mumbai-based bank said.