Option traders see RBI's grip on Rupee lasting for the rest of 2023

By Ronojoy Mazumdar and Akshay Chinchalkar

Option traders are betting that the Reserve Bank of India will grip the rupee tightly through the remainder of the year.
 

Data show traders are betting on the currency weakening less than 1 per cent by end-December, with open interest on contracts expiring in the coming months clustered mostly around the 83 and 84 per dollar levels. The rupee was little changed at 83.18 Wednesday. 

The rupee has weakened about 0.5 per cent this year, the least among Asia’s emerging markets, thanks to inflows of nearly $18 billion and RBI intervention. The central bank’s defense of the rupee has kept it from declining past its life-time low of 83.29 even as higher US yields have inflicted pain across risk assets.

“Low risk, low volatility and a low price range are what the pricing is indicating,” said Dilip Parmar, currency analyst at HDFC Securities. “Even in such a risk-averse environment globally with the war in Middle East and Treasury yields higher, we remain on the resilient side.”

Options expiring in October have open interest mostly at the 83 and 83.25 levels, a range that has hardly been broken in more than a month. 

While analysts see RBI’s hand in keeping the local currency steady, the authority has repeatedly said it intervenes in the foreign exchange market only to manage volatility and not to target a specific level for the rupee.