R volatility declines for fourth week on economic optimism

Mumbai, Sept 5: A gauge of expected swings in the rupee fell for a fourth week on optimism the country’s improving economy will draw capital from abroad.

Gross domestic product (GDP) increased 5.7% from a year earlier in the April-June period, the most since the first quarter of 2012, official data showed on August 29. Global funds have pumped more than $10 billion into the nation’s bonds and stocks this quarter, exchange data show. “Higher foreign inflows into debt and equities, spurred by faster economic growth is supporting the rupee,” said Anish Vyas, a Mumbai-based currency analyst at Angel Broking. Gains in the dollar amid expectations that US interest rates are set to rise capped the rupee’s appreciation, he said.

Three-month implied volatility in the rupee, a measure of expected fluctuations used to price options, dropped 50 basis points from a week ago to 6.67%, according to data compiled by Bloomberg. It fell 10 basis points, or 0.10 percent- age point, on Friday.

In the spot market, the rupee rose 0.2% this week to close at 60.4075 per dollar, according to prices from local banks compiled by Bloomberg. It fell less than 0.1% on Friday. The Bloomberg dollar spot index, which tracks the greenback against 10 developed-market peers, climbed on Friday to the highest level since July 2013.

Three-month offshore non-deliverable forwards rose 0.1% to 61.29 a dollar and advanced 0.1% from August 29. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in US dollar. Bloomberg