Rupee slips, muted price action sinks volatility expectations to five-month low
The rupee closed down 0.1% at 95.44 per dollar, with 1-month implied volatility dropping to 4.2%, its lowest since early March
The Indian rupee slipped modestly on Thursday, impacted by dollar outflows tied to derivative maturities and overseas debt repayments. The central bank's frequent interventions continued to suppress volatility expectations, which dipped to a five-month low. Closing at 95.44 per dollar, the rupee's 1-month implied volatility decreased to 4.2 per cent, the lowest since early March.
Implied volatility had fallen from over 5 per cent at the beginning of the month as the central bank's interventions maintained price stability, discouraging speculation. The central bank had intervened almost every trading session that week. Traders noted a lack of urgency to sell USD/INR due to oil risks and subdued bid yields, unless there were gaps in opening prices.
Brent crude oil futures declined 1.7 per cent, as investors evaluated potential weaker global demand and looked for support amid progress issues in Strait of Hormuz negotiations. India's import dependence on crude imports, which account for nearly 90 per cent of its crude needs, makes it highly vulnerable to Middle East oil shocks.
On the day, India's merchandise trade deficit expanded to $31.98 billion in July, surpassing forecasts of $30.20 billion.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
