The Indian rupee remained largely stable on Thursday, trading at 84.0625 (AED22.905) against the U.S. dollar by 11:00 a.m. IST, nearly unchanged from its previous session close of 84.08. Despite regional currencies showing slight gains of 0.1% to 0.3%, the rupee has remained near record low levels, reflecting ongoing volatility in global markets.
The rupee’s movement comes amid increasing volatility expectations as the U.S. presidential election approaches. A surge in U.S. bond yields, driven by higher odds of a Donald Trump victory, and sustained capital outflows from Indian equities have kept pressure on the currency. Despite these factors, the Reserve Bank of India’s (RBI) regular market interventions have helped prevent the rupee from experiencing sharp declines, traders noted.
The RBI’s efforts have also contributed to keeping the rupee’s near-term implied volatility relatively low. In contrast, other regional currencies are seeing a rise in volatility ahead of the U.S. election. For example, the offshore Chinese yuan’s one-month implied volatility increased from 6.7% last month to 7.5%, while the rupee’s volatility has remained steady at around 2%.
A note from MUFG Bank highlighted the growing risks of U.S. tariffs should Trump win the election. “Trump’s tariffs could significantly impact the outlook for Asian economies, posing a downside risk to our forecasts for Asian currencies,” the bank stated.
The rupee’s stability in terms of volatility has allowed it to outperform several of its regional peers. While Asian currencies have weakened by 0.6% to 4.5% so far in October, the rupee has only depreciated by 0.3%, thanks to the central bank’s efforts to manage the currency’s fluctuations.
The subdued volatility of the rupee compared to its regional peers has helped cushion its decline during a turbulent period for global currencies, but traders remain cautious as the U.S. election draws nearer.
