The Volatility of India’s Rupee Declines to 3-Year Low as Monsoon Rains Increase


The Volatility of India’s Rupee Declines to 3-Year Low as Monsoon Rains Increase A measure of the India’s rupee expected volatility fell to its lowest level in three years after the surging monsoon rains eased fears that agricultural output will decline and fuel inflation as a result.

The rupee’s 3-month implied volatility, an index that measures the expected swings in the exchange rate used to assign prices to options, plunged 27 basis points to 7.08 percent in Mumbai trading, its lowest level since August 2011. The currency declined just under 0.1 percent in the spot market to trade at 60.1775 per dollar.

The rupee’s 3-month offshore non-deliverable forwards advanced 0.1 percent to trade at 60.83 per dollar.

“The recent news about monsoon revival, easing inflation and rising industrial production is positive,” Vikas Babu, a foreign-exchange trader at Andhra Bank in Mumbai told Bloomberg News. “The market was largely lackluster today. The rupee gained initially as exporters sold dollars and dropped a bit later as oil companies were seen in the market.”


The deficit on the June-September rainfall shrank to 36 percent of target 50-year median since June 1, reported the weather department on Wednesday. This compares with 43 percent as of July 11.

Consumer prices increased 7.3 percent in June, the slowest pace since the beginning of 2012. Factory output rose 4.7 percent in May from a year ago, the quickest pace in 19 months, while overseas shipments rose 10.2 percent last month.

Meanwhile, the Russian ruble plunged the most since the country invaded Crimea after the U.S. imposed further sanctions on Russia for its interference in the Ukraine conflict. The currency fell 1.6 percent to trade at 34.9265 per dollar by 4:27 p.m. in Russia, the steepest drop since March 3. Later in the day, the ruble fell further on news that a Malaysian Airlines plane was shot down in Ukraine. To register for a free 2-week subscription to ForexMinute Premium Plan, visit

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