MUMBAI: The Indian rupee held steady on Tuesday after a slight dip at open, while implied volatility eased further as traders awaited key domestic and U.S. events this week.
The currency slipped past 85.50 at open, down about 15 paisa from Monday, hitting a low of 85.56. The currency has been rangebound post that and was last quoting at 85.47 to the U.S. dollar.
“The rupee has been trading in a relatively narrow range last few days, and today appears no different,” said a currency trader at a private bank.
“It’s essentially a wait-and-watch scenario now, with markets looking for either flows or headlines to provide a directional cue.”
The dollar was broadly under pressure, weighed down by concerns over the U.S. fiscal deficit and lingering uncertainty around trade policy. However, the rupee failed to capitalise on the modest uptick on most Asian currencies.
Indian rupee ends higher boosted by fragile dollar, likely portfolio inflows
The rupee’s implied volatility has been sliding lower, thanks to the rangebound spot. The 1-month implied volatility is now at 5%, having peaked at over 7% in the second week of May.
Traders highlighted two key events on their radar this week - the Reserve Bank of India’s policy decision on Friday and the U.S. non-farm payrolls report scheduled for the same day.
The RBI is widely expected to cut rates for the third straight meeting on Friday given the benign inflation backdrop. Later that day, the U.S. non-farm payrolls report for May could influence expectations around potential Federal Reserve rate cuts, depending on the strength of labour market data.
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