Rupee volatility drops to 8-month low

Implied volatility in the rupee dropped to an eight-month low, as US housing data that beat analysts’ estimates brightened the outlook for a global economic recovery.

The rupee declined 0.1 per cent in the spot market to 55.10 per dollar in Mumbai, according to data compiled by Bloomberg. The currency, which earlier on Tuesday rose as much as 0.5 per cent, will strengthen to 53.3 by the end of March, Morgan Stanley forecasts. It touched 55.1950 on November 16, the weakest level since September 13.

“We see prospects for a steadily appreciating rupee in coming months,” strategists at Morgan Stanley, including London-based Hans Redeker, wrote in a research note on Tuesday.

Bonds react downwards, call rates high
G-sec bonds reacted downwards on selling pressure from banks and corporates . The 8.15 per cent government security maturing in 2022 fell to Rs 99.66 from Rs 99.72 previously, while its yield inched up 8.20 per cent from 8.19 per cent. The 8.33 per cent government security maturing in 2026 dropped to Rs 100.26 from Rs 100.32, while its yield edged up to 8.30 per cent from 8.29 per cent.

The overnight call money rates ended higher on good demand from borrowing banks. The rate finished higher at 8.10 per cent from 8.05 per cent yesterday. It moved in a range of 8.15 per cent and 7.95 per cent.