Even in a year where currency volatility is falling worldwide, the slump in swings in the Indian rupee has traders from London to Singapore asking when the central bank will loosen its iron grip.
The rupee’s one-month implied volatility versus the dollar crashed to its lowest since 2005 in June, drawing queries from investors on roadshows of Citigroup Inc. and ICICI Securities Primary Dealership Ltd. to gauge the path ahead for the Indian currency. That’s largely because of the outsized role of the Reserve Bank of India in keeping the rupee in a tight range.
The RBI has added back $32 billion in reserves already this year as it absorbed foreign inflows to keep the currency steady, while its dollar forward book also climbed by around $10 billion in the first four months of the year. The central bank’s efforts for a stable rupee may be aimed at boosting its appeal as an international trade currency, according to Citigroup.
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