Are rupee traders jittery about Trump-Putin meet? Options suggest not really
One-month implied volatility on the dollar/rupee stood at 4.35% on Friday, the lowest this month, while the spot/week implied hovered near monthly lows.
Further, the cost of buying options that benefit from a rupee decline was roughly the same for those that profit from its rise, pointing to a lack of clear directional conviction.
"Options markets are in no rush to price in a big move on the rupee, which is understandable considering the recently subdued realised volatility," said a rupee volatility trader at a mid-sized private sector bank.
"Being long volatility doesn't pay off often, especially when the Reserve Bank of India (RBI) appears to be defending a level."
The rupee was quoting at 87.55 to the U.S. dollar, down 0.% from Wednesday. It had touched 87.8850 last week after U.S. President Donald Trump imposed additional tariffs on Indian goods over New Delhi's Russian oil purchases.
The RBI had stepped in to prevent the currency from breaching the all-time low of 87.95, a level bankers believe the central bank will continue to defend.
The Trump-Putin meeting on Friday in Alaska carries more weight for the rupee than for most of its Asian peers, amid escalating trade tensions with the U.S., which have culminated in potential 50% tariffs on Indian goods.
A 25% levy is already in place, with the additional 25% scheduled to take effect on August 27.
"If tariffs of 50% were to be sustained, we see USD/INR rising to 89.50 levels by June 2026, implying outright INR underperformance against major currency pairs including Asian FX," MUFG Bank said.
Indian financial markets will be shut on Friday, leaving any immediate reaction to be reflected only in Monday's trading.
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