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LoansJagat Team

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18 Jun 2025

India-Pakistan War: What Happens To The Rupee's Value?

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We can see that recently markets have seen a sharp reaction to escalating tension on borders. The local currency saw its worst single-day loss in over two years.

 

Recently, the local currency dropped 84 paise to settle at ₹85.61 per US dollar. This sudden drop wiped out all gains made earlier this year.

 

Rakshit has a child named Kritika. She is pursuing her master's from Canada. He is required to send her $15,000 for the same. Last week the cost would have been ₹12,71,550 at ₹84.77 per dollar.

 

Now, at ₹85.61, the same payment would need ₹12,84,150. You can see that it is an increase of ₹12,600 without any change in the dollar amount.

 

The Connection Between War And Rupee

 

The currency market reacts as soon as military actions begin or border strikes are reported. The average fall in local currency ranges between 1% to 2% in just the first few trading sessions.

 

Year

Incident

Initial Fall In Rupee

Timeframe

1999

Kargil Conflict

-2.5%

14 days

2001

Parliament Attack Fallout

-1.4%

3 days

2016

Cross-Border Surgical Strikes

-1.2%

1 day

2019

Balakot Operations

-1.6%

3 days

2025

Operation Sindoor

-1.5% (Day 1)

Ongoing

 

We can see from past incidents that the local currency often depreciates during such situations.

 

Movement Of Currency In May 

 

We can see in just one day that the rupee dropped from ₹84.77 to ₹85.61, after Operation Sindoor. 

As per the reports of FXStreet and Business Standard, the ₹86.50 mark is now a primary level traders are watching. 

 

Date

Rupee Close (USD-INR)

Change (₹)

Movement (%)

6th May, 2025

₹84.77

-

-

7th May, 2025

₹85.61

-0.84

-0.99%

8th May, 2025

₹85.38

+0.23

+0.26%

9th May, 2025

₹85.41

+0.03

+0.04%

 

Reasons Behind Fall In Rupee

 

1. Foreign Investors Are Taking An Exit 

 

In just two days, we can see that the Foreign Institutional Investors have sold securities worth approx. ₹7,800 crore. 

 

Due to loss of such an amount, the value of the rupee falls due to less availability of dollars in the market.

 

2. Oil Prices Jump

 

Global crude prices have increased by $4 per barrel during a tense situation. It increases the import bill, pushing down the local currency.

 

3. Risk Of Trade Disruption

 

We all know that nowadays, security has tightened, and border rules have become stricter. Such rules have slowed down the exports. Importers, mainly in technology and machinery, are also facing trouble. This gap is the rising demand for US dollars.

 

Reasons

Impact on Rupee

Influence

Increase in Defence Cost

Negative

Higher pressure of fiscal deficit

Higher Prices Of Crude 

Negative

Higher cost of import 

Fall In the Stock Market

Negative

Lower confidence of the investor 

The Outflow of FII

Negative

Reduced supply of USD in the markets

 

What Does It Mean for You?

 

1. Education in Foreign Countries Becomes Expensive

 

If you or your family member is studying abroad, and you support their education from India. So, now with the fall in rupees, things will become expensive for you. As of now, you will have to send more rupees for the same amount of USD.

 

2. Travel To Foreign Countries

 

You can see that with just a decrease of ₹1, your family’s trip to Europe now would cost ₹19,000 to ₹24,000 more per person. However, this is not an exact amount; it will depend on your travel plan.

 

3. Imports Get Costlier

 

Items such as smartphones, laptops, and premium vehicles see a rise in prices because of costlier imports.

 

Category

Cost (₹84.77)

Cost  (₹85.61)

Extra Cost

Education ($30k)

₹25,43,100

₹25,68,300

₹25,200

Trip to US ($5k)

₹4,23,850

₹4,28,050

₹4,200

iPhone ($1.2k)

₹1,01,724

₹1,02,732

₹1,008

MacBook ($2k)

₹1,69,540

₹1,71,220

₹1,680

 

Is There Any Positive Side?

 

The following sectors generally benefit from a falling rupee:

 

Sector

Effect Of Weak Rupee

Reason

IT Services

Positive

Income is in dollars

Pharma Export

Positive

Exports gain due to billing in dollar

Aviation

Negative

Increase in cost of fuel and lease of aircraft 

Auto (Luxury)

Negative

Imports become costly

Steel Export

Positive

Prices become more competitive

 

What Do Experts Predict?

 

Let’s look at the predictions made by financial institutions for the rupee in the coming weeks:

 

Source

Forecast (USD-INR)

Conditions

Axis Bank

₹86.50

Continued border tension

Nomura

₹84.70

With support from central bank

ICICI Securities

₹87.00

If crude stays above $90 per barrel

Business Standard

₹85.00 to 85.30

If peace talks resume

 

Final Thoughts

 

The war-like situation between India and Pakistan has shown us how vulnerable currency markets are to sudden shocks.

 

In just two sessions, the rupee has already lost nearly 1.5%. However, it can recover temporarily. The trend mainly depends on the ground situation and the central bank's response. 

 

If you are dealing with overseas payments, you are advised to hedge or make payments early. For exporters, this may be a short window of benefit.

 

In such situations, we can only depend on predictions from experts, as nothing is specific. 

 

FAQs

 

1. Is it a good time for me to send money internationally?

Yes, you can. If it is possible for you to send it early to avoid further loss.

 

2. Should I postpone my trip to foreign countries?

Yes, if possible you must postpone it.

 

3. What is the current rate of exchange?

On 10th May, 2025 the market closed at ₹85.35.

 

4. Which industry takes advantage of falling rupee value? 

Industries based on exports such as IT and pharma.

 

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