Even as its regional peers prepare for swings ahead of the US presidential election, the Indian rupee was mainly steady on Thursday, with volatility forecasts indicating that the currency is projected to stay rangebound.
As of 11:00 am IST, the rupee was trading at 84.0625 versus the US dollar, down from its closing of 84.08 the day before. The rupee saw only slight respite from gains in the majority of its Asian peers. The value of regional currencies increased by 0.1% to 0.3%.
Due to persistent outflows from local equities and rising US bond yields fuelled by increased probabilities of Donald Trump winning the next US election, the local currency has spent most of the week stuck near record low levels.
Traders stated that despite the various pressures, the rupee has avoided steep drops because to the Reserve Bank of India’s regular interventions.
Even if the rupee’s peers’ implied volatility increased in the run-up to the election, the central bank’s actions have also helped to keep the rupee’s implied volatility low in the near term.
While the rupee’s 1-month implied volatility has remained relatively constant at around 2%, the offshore Chinese yuan’s has increased to 7.5% from 6.7% at the end of last month. In a note, MUFG Bank stated that “US tariff risk is growing, given rising odds of Trump winning.”
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