Rupee to fall further? At least, punters think so

Punters in the currency market are betting that the rupee will slide further against the US dollar in the short term ahead of the US Federal Reserve’s meeting and the Reserve Bank of India’s policy meeting in the second half of September.

While the rupee strengthened against the dollar on Tuesday, open interests rose for call and put options of strikes between 66.50 and 69.75 for the September series, according to the data on NSE. In comparison, open interests below the call option strike of 66.5 reduced. This means that the number of traders who were anticipating that the rupee could reverse its weakening trend has come down.

“The new range for rupee now seems to be Rs 65 to Rs 67. It can also go down to 67.5. The weakness in the equity market has added to the pressure,” said Suresh Nair, director, ADMISI Forex.


Also, the put-call ratio (total number of puts divided by total number of calls) is 0.7, which means there are more bearish positions than bullish ones.

The rupee has fallen sharply (by 3.5%) in the last one month after the devaluation of the Chinese yuan.

The trend could continue if the Fed increases interest rates on September 17. Higher interest rates can lead to the strengthening of the dollar against various currencies. The pressure on the rupee may reduce if the Fed doesn’t hike the rates this month.
The next Fed meet is expected to be in December. Historically, the American central bank has never hiked rates in December. On Tuesday, US Dollar to the Indian rupee closed at 66.55, down 0.42% from the previous day’s close