The India’s rupee volatility declined to its lowest level in three years on speculation the central bank’s effort to attract foreign investor interest in its sovereign debt will attract inflows.
The rupee’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign price to options, plunged 0.06 percentage point or six basis point, to 5.82 percent, the least since August 2011.
The rupee remained slightly unchanged in the spot market after earlier surging by up to 0.2 percent to trade at 59.9875 per dollar, its highest level since July 14. The 3-month offshore non-deliverable forwards, which are usually settled in dollars, remained steady at 60.77 per dollar.
The Reserve Bank of India on Wednesday widened the limit for some foreign investors by $5 billion. Such investors must spend the extra allocation on notes that mature in more than three years, said RBI.
“There is optimism about more inflows on the back of the government allowing higher investment in debt.” Ankur Jhaveri, a Mumbai-based co-head of currency and rates at Edelweiss Financial Services Ltd, told Bloomberg. “Toward the end of the trading session, month-end dollar demand by oil companies capped gains in the rupee”.
Meanwhile, the euro rebounded from its lowest level in eight months on Thursday after French and German business surveys exceeded forecasts, though the currency was weighed by the risks to the euro area economy posed by harsher sanctions on Russia.
The euro rose to a peak of $1.34855 after the euro zone “flash” composite poll was published, with the index touching its highest level in three months in July. The 18-nation currency had earlier plunged to an eight-month low of $1.3438 in London. The euro traded 0.2 percent up versus the yen at 136.93 yen and appreciated versus the pound to 79.20 pence, after earlier touching its lowest level in 23 months on Wednesday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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