The Indian rupee fell 0.52% to a record 88.79 per U.S. dollar on Tuesday after new U.S. tariffs and higher H-1B visa fees.
Market expectations for swings remain low. Three-month implied volatility is at a six-month low and one-year volatility at a year-to-date low. Normally, implied volatility rises at lifetime currency lows, but corporate hedging has anchored the market.
Corporate activity in dollar/rupee options rose 70% to US$73 billion between January and August, compared with less than US$20 billion in 2020. Companies supplying volatility through low-cost hedges have kept expectations subdued.
Bankers also cited the Reserve Bank of India's interventions and offshore traders' reluctance to take large downside positions after past losses. Under Governor Sanjay Malhotra, the RBI has allowed a wider trading band but continues to aim for orderly conditions and limited volatility.
Source: Reuters