A measure of expected swings in India’s rupee jumped the most since May on speculation importers will step up dollar purchases to pay month-end bills.
One-month implied volatility, a gauge used to price options, climbed 21 basis points, the most since May 27, to 5 percent in Mumbai, data compiled by Bloomberg show. In the spot market, the rupee rose 0.2 percent to 63.5525 a dollar after dropping to a three-week low of 63.7525 earlier.
“Month-end dollar demand is weighing on the rupee,” said Sandeep Kanihama, a currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. A strong dollar overseas is also impacting sentiment, he said.
A gauge of the greenback advanced to a four-month high on Monday as St. Louis Federal Reserve President James Bullard said there’s a more than 50-50 chance the U.S. central bank will raise interest rates in September. The index declined 2 percent on Tuesday.
Almost all Asian currencies have declined this month on speculation U.S. policy makers will increase borrowing costs for the first time since 2006. Fed Chair Janet Yellen told lawmakers last week that waiting too long to raise rates holds risks for the economy, along with tightening too quickly.
The yield on India’s government bond due May 2025 was little changed at 7.84 percent, according to prices from the central bank’s trading system.