Rupee treads water with Asian peers, volatility curve shifts lower

Reuters

2 days ago

MUMBAI, June 10 (Reuters) - The Indian rupee was marginally higher in early trading on Monday, sidestepping modest declines in most regional currencies on the back of dollar-selling interest from foreign and state-run banks, traders said.
On the day, the rupee was last quoted at 85.55, up marginally from its close of 85.62 in the previous session.
Asian currencies were mostly rangebound as well, with traders awaiting the outcome of the ongoing U.S.-China trade talks in London.
U.S. President Donald Trump on Monday put a positive spin on the talks, saying they were going well and he was "only getting good reports" from his team of officials.
Trade talks between Indian and U.S. officials are also ongoing, with both sides seeking consensus on tariff cuts in the farming and auto sectors. The two countries aim to finalise an interim deal before the July 9 deadline.
For the local economy, the Reserve Bank of India is "likely to play a key role in delivering policy support, with fiscal policy more focused on capex execution," BofA Global research said in a note.
The rupee's range-bound price action over the last one month, meanwhile, has cooled its volatility expectations across tenors. The 1-month implied volatility eased to about 4.7%, and the 1-year gauge dipped to about 4.6%.
The gauges had spiked sharply in early May as a conflict between India and Pakistan flared up, but have since cooled as the rupee settled into an 85-86 range over the past month.
"As markets await the outcome of the U.S.-China trade talks, the rupee has gone into a shell within the broad range of 85-86, with daily inflows and outflows deciding the movement on either side," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.