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Rupee rises on dollar index weakness; volatility remains muted

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MUMBAI — The Indian rupee advanced against the U.S. currency on Thursday, tracking a fall in the dollar index ahead of U.S. data.

The rupee last traded at 82.7625 per U.S. dollar, up marginally from 82.81 in the previous session. The rupee held an 82.65 to 82.80 range on volumes that were better than Wednesday, but lower than usual.

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The volume on the interbank order matching system was $4.6 billion, compared to $4.4 billion the day before and this month’s daily average of $5.6 billion.

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Yet again, it was a nothing kind of a session and we think it will remain like this till the New Year, a trader at a public sector bank, who did not wish to be named, said.

The rupee’s volatility has come off. The realized volatility, measured in terms of the last 10 days’ prices, has dropped to 4.1%.

“Today, the focus will be on the final GDP number from the U.S.,” Motilal Oswal said in a note. “We expect USD/INR to trade sideways and quote in the range of 82.40 and 83.05.”

Economists polled by Reuters expect the final third-quarter GDP number to come in at 2.9%. The core PCE (Personal Consumption Expenditures) Price Index number for the same quarter and the latest U.S. jobless claims data are due for release alongside the GDP data.

The key for the rupee and other emerging market currencies next year will be contingent on how the U.S. inflation and growth data shape up and how they affect the U.S. Federal Reserve rate expectations.

The rupee forward premiums jumped, resuming their uptrend that began about two weeks ago. The 1-year USD/INR implied yield rose about 7 basis points to 2.15% on paying by public sector banks, traders said. (Reporting by Nimesh Vora; Editing by Janane Venkatraman )

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