Rupee Volatility At Its Highest In Four Years
The one-month expected dollar-rupee volatility has risen 40 percent this year from 4.68 to 7.78.
Volatility in the rupee spiked to its highest in four years after the shock resignation of Urjit Patel as the Reserve Bank of India governor after a standoff with the government and the ruling Bharatiya Janata Party’s loss in three state elections.
The one-month expected dollar-rupee volatility has risen 40 percent this year from 4.68 to 7.78. Patel’s exit and the setback for Prime Minister Narendra Modi’s party in state elections drove it as high as 8.1 on Dec. 11.
For most of the year, volatile crude prices and a trade war between the U.S. and China weighed on the Indian currency. Brent crude oscillated between $67 a barrel at the beginning of the year and a high of $85 on Oct. 9—it’s now at $60. The rupee weakened to a record low of 74.48 in October and started recovering as oil prices.
The local unit, according to Kotak Securities, will now fluctuate with changes in the U.S. treasury rates and the general election in India next year.
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