Rupee Volatility Declines for Fourth Week on Economic Optimism

A gauge of expected swings in India’s rupee fell for a fourth week on optimism the nation’s improving economy will draw capital from abroad.

Gross domestic product increased 5.7 percent from a year earlier in the April-June period, the most since the first quarter of 2012, official data showed Aug. 29. Global funds have pumped more than $10 billion into the nation’s bonds and stocks this quarter, exchange data show.

“Higher foreign inflows into debt and equities, spurred by faster economic growth is supporting the rupee,” said Anish Vyas, a Mumbai-based currency analyst at Angel Broking Ltd. Gains in the dollar amid expectations that U.S. interest rates are set to rise capped the rupee’s appreciation, he said.

Three-month implied volatility in the rupee, a measure of expected fluctuations used to price options, dropped 50 basis points from a week ago to 6.67 percent, according to data compiled by Bloomberg. It fell 10 basis points, or 0.10 percentage point, today.

In the spot market, the Indian currency rose 0.2 percent this week to close at 60.4075 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell less than 0.1 percent today. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, climbed today to the highest level since July 2013.

Three-month offshore non-deliverable forwards rose 0.1 percent to 61.29 per dollar and advanced 0.1 percent from Aug. 29. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.

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