FxWirePro: INR likely to weaken further as tension escalates at Indo-Pak border

Two nuclear-armed neighbors, which were once one country is dragging each other close to a full-blown war, as tension continues to escalate.

• The situation along the Indo-Pak border has been tense since the deadly terrorist strike on a paramilitary convoy, killed almost 50 army men in the disputed region of Jammu and Kashmir on the northern part of India, earlier this month.
• It got heated yesterday morning local time as Indian fighter jets infiltrated Pakistani border and launched massive air raid in the Balakot region, believed to be the home of the biggest Jaish-e-Muhammad terrorist camp, a group that claimed the responsibility for the attack on Indian paramilitary force.

In the latest turn of events, the Indian government announced that it has shot down one Pakistani fighter jet, and lost one. The tension between the two neighbors has not been this high since the Kargil war of 1999.

Global leaders have called on both countries to deescalate the tension, however, the risk of a more direct conflict rising by the day.

We expect the INR to continue to weaken against the majors; JPY, GBP, EUR, & USD. A greater conflict would force the rupee to retest its all-time low against the USD.

INR is currently trading at 71.26 per USD.