Amid tensions with Pakistan, India's currency Rupee, on Friday (May 9) continued its decline and plunged by 30 paise to open at 85.88 against the US dollar.

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The previous day (Thursday, May 8), with the markets rattled by the ongoing geopolitical tensions with Pakistan, the rupee had its worst single-day fall in over two and a half years (since 6 February 2023), opening at 84.61 and closing at 85.58 against the dollar. Both the currency and stock markets declined yesterday after India confirmed that it had targeted a number of air defence radars and systems in Pakistan.

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What's behind the fall?

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Traders and analysts cited the intensifying military standoff with Pakistan and rising demand for the safe-haven US dollar as primary triggers.

The Reserve Bank of India (RBI) has reportedly intervened in the forex market to curb volatility and prevent panic-driven depreciation. Analysts say RBI may step in more aggressively if the rupee breaches 86.

Without RBI's intervention, we could see the rupee hit 87, warned Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.

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"With hostilities increasing and if RBI does not step in, we can see the rupee reach even 87 tomorrow with a more than 1 rupee movement seen today," he said as cited by The Mint.

Latest in Indo-Pak tensions

Pakistan, on the intervening night of May 8 and 9, once again violated the ceasefire along the Line of Control (LoC). This is the 15th consecutive violation by Pakistani troops since the horrific Pahalgam terror attack, in which 26 people were indiscriminately gunned down by terrorists.

As per India's Additional Directorate General of Public Information (ADG PI) of the Indian Army, Pakistan Armed Forces launched multiple attacks using drones and other munitions along the entire Western Border.

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Furthermore, Pakistani forces also resorted to "numerous cease fire violations (CFVs) along the Line of Control in Jammu and Kashmir".

The Indian army "effectively repulsed" the drone attacks and also gave a "befitting reply" to the CFVs.