Mumbai, Apr 25 (PTI) The rupee pared its initial gains and settled for the day lower by 8 paise at 85.41 against the US dollar on Friday, amid heightened geopolitical tensions and a negative trend in the domestic markets.

Forex traders said escalated geopolitical tensions, following a terror attack in Pahalgam, Jammu & Kashmir weighed on market sentiment.

Moreover, a muted trend in domestic equities and positive US dollar index dented investors’ sentiment further.

At the interbank foreign exchange, the domestic unit opened at 85.17 and moved between the intra-day high of 85.08 and the low of 85.65 against the greenback. The unit ended the session at 85.41, registering a fall of 8 paise over its previous closing level.

On Thursday, the rupee gained 12 paise to close at 85.33 against the US dollar.

According to Dilip Parmar, Senior Research Analyst, HDFC Securities, geopolitical worries triggered a depreciation of the Indian rupee after Thursday’s gains. A sell-off in domestic equities further dampened sentiment.

“The local rupee experienced volatility throughout the week amidst these geopolitical concerns and dollar demand from hedgers. Looking ahead, spot USD-INR finds support at its 200-day moving average (DMA) of 84.97 and faces resistance at 85.70,” he added.

On Tuesday, at least 26 persons — mostly tourists — were killed by terrorists at the Baisaran meadows in Pahalgam in one of the worst terror attacks on civilians in Kashmir in the past many years.

In a stern message, Prime Minister Narendra Modi on Thursday said India will identify, track and punish every terrorist and their backers who were responsible for the attack in Pahalgam “beyond their imagination”.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.24 per cent at 99.61.

“We expect the rupee to trade with a negative bias amid heightened geopolitical tensions and weak tone in the domestic markets. However, persistent FII inflows, overall weakness in the US dollar may prevent a sharp fall in the rupee. USD-INR spot price is expected to trade in a range of 85 to 85.90,” said Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan.

Brent crude, the global oil benchmark, fell 0.66 per cent to USD 66.11 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex slumped 588.90 points or 0.74 per cent to 79,212.53, while the Nifty fell 207.35 points or 0.86 per cent to 24,039.35.

Foreign institutional investors (FIIs) bought equities worth Rs 2,952.33 crore on a net basis on Friday, according to exchange data.

Meanwhile, the Reserve Bank of India on Friday said that the country’s forex reserves jumped USD 8.31 billion to USD 686.145 billion for the week ended April 18. This was the seventh consecutive week of rise in the kitty.

Forex traders also said a prospective trade agreement with the US boosts India’s strategic edge.

US Treasury Secretary Scott Bessent has said he expects India to strike the first bilateral trade deal to avoid President Donald Trump’s reciprocal tariffs.

The 90-day pause on a 26 per cent ‘reciprocal’ tariff on Indian exports to the US is set to end on July 8. However, like other countries, India is presently subject to a 10 per cent tariff under the existing policy. PTI DRR HVA