Key points
- Rupee gains but upside still limited by well defined resistance area
- Yuan gains as China’s state-owned banks sell dollars in the offshore spot Forex market
- Rupee’s low implied volatility benefits options sellers
India’s Rupee firmed against the US Dollar on Tuesday, as Asian currencies recovered driven by China’s Yuan on indications China’s central bank saw the currency’s recent drop as being too quick.
China’s major state-owned banks were reportedly selling dollars in the offshore spot Forex market on Tuesday, which implied monetary authorities sought to slow the pace of the Yuan’s recent depreciation.
Such activity was seen as the offshore Yuan approached the key 7.25 per dollar threshold. As a result, the Chinese currency regained some ground to 7.2180 per dollar.
As of 7:14 GMT on Tuesday USD/INR was inching down 0.08% to trade at 81.9190. The exotic Forex pair has found solid support within the area between 81.8500 and 81.9300 over the past ten trading days.
Meanwhile, the Indian Rupee’s 1-month implied volatility was at 3/3.2.
“Implied volatility in USD/INR options are hovering near 15-18 year lows across tenors,” Anindya Banerjee, head of research – FX and interest rates at Kotak Securities, was quoted as saying by Reuters.
“Option sellers can concentrate on strategies such as the short straddle, short strangle.”
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