India rupee volatility hits over 4-mth high ahead of RBI

India rupee volatility hits over 4-mth high ahead of RBI

Summary :

The RBI is widely expected to raise the repo rate as it continues its battle to control inflation. Economists, however, differ on the size of the rate hike that the RBI will deliver as the central bank aims to strike the right balance between inflation and growth. **”Historically, whenever the implied volatility in options has been priced higher ahead of the policy, there tends to be lower-than-expected volatility in the pair (USD/INR),” Anindya Banerjee, vice president at Kotak Securities, said. **The rupee this week so far has traded in a wide 78.49 to 79.8075 range amid worries over a record trade deficit and RBI intervention.

MUMBAI, Aug 5 (Reuters) – The Indian rupee’s volatility, measured in terms of the daily close-to-close, reached its highest level since late-March ahead of the Reserve Bank of India’s policy decision.The RBI is widely expected to raise the repo rate as it continues its battle to control inflation. Economists, however, differ on the size of the rate hike that the RBI will deliver as the central bank aims to strike the right balance between inflation and growth. read more

**The daily close-to-close rupee realized volatility climbs to 6.2% from 5.7% on Thursday.

**1-month expected OTC volatility at 5.30%, highest in two weeks. Implied volatility on out-of-the-money exchange traded options expiring Aug. 26 at 5.5%-6%.

**”Historically, whenever the implied volatility in options has been priced higher ahead of the policy, there tends to be lower-than-expected volatility in the pair (USD/INR),” Anindya Banerjee, vice president at Kotak Securities, said.**The rupee this week so far has traded in a wide 78.49 to 79.8075 range amid worries over a record trade deficit and RBI intervention.

**Rupee trading at 79.08 per U.S. dollar compared with 79.4650 on Thursday.

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