On Thursday, the Indian rupee had its worst session in more than two years, as rising geopolitical tensions along the border with Pakistan weighed on the currency.

According to Bloomberg data, the domestic currency closed 89 paise lower at 85.72 against the greenback, down from 84.83 on Wednesday. The currency fell by 1.03 percent today, marking the worst day since February 6, 2023.

With Thursday's decline, the currency has fallen 2.3% in the last five trading sessions. The currency and stock market fell on Thursday after India confirmed that it had targeted air defense radars and systems in multiple locations in Pakistan in retaliation for Pakistan's attempt to attack several military targets in India.

The defence ministry stated that India's response has been in the same domain and intensity as Pakistan's. It has been reliably reported that an air defense system in Lahore has been neutralised. "Indian Armed Forces reiterate their commitment to non-escalation, provided it is respected by the Pakistani military," according to a public statement.

According to Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities, the rupee fell sharply, its largest single-day drop in two years, amid escalating tensions along the India-Pakistan border. "Reports of drone attacks and retaliatory strikes in the last 24 hours have increased geopolitical uncertainty, leading to a risk-off sentiment. If the situation worsens, the rupee may face additional pressure, with lower levels of 86.00-86.50 coming into play.

On the global front, US President Donald Trump has stated that a'major' trade agreement with a large country is on the way. "Major trade agreement with representatives from a large and highly respected country," Trump stated in a Truth Social post.

Meanwhile, the US Federal Reserve kept interest rates unchanged as the risks of higher inflation and unemployment grew. Jerome Powell emphasized that the overall economy has continued to grow at a steady pace.

According to Pabari the informal capital has shifted from confidence to caution thus seeing the dollar getting a boost. The dollar rose against a trade-weighted basket of the currencies, rising by 0.56 percent to 100.17.

The prices of crude oil were slightly up due to investors’ concern over the trade relations between United States and China . During the time of writing this at 3:50 PM, WTI crude oil was trading higher by 1.43 % to 58.90 and Brent crude was higher by 1.26 % to $ 61.89 per barrel.