The rupee has been among the most battered currencies in Asia this month, and the options market is signaling that its troubles are far from over.
The currency is staring at a record low following a 2.8% slump so far in March, as foreign investors flee Indian assets on concern that rising local and global coronavirus cases will inflict more pain on an already struggling economy.
Here’s a look at three metrics that show how the bearish sentiment is intensifying:
The rupee’s one-month risk-reversal rate shows that the premium to protect against dollar strength in the options market surged to the highest since November 2013 on Thursday.
“The jump in options tells us that the market expects the rupee to be volatile in the short term and it may see further weakness,” said Rohit Garg, a Singapore-based emerging-markets strategist at Bank of America Securities. When a risk-off wave is sweeping across the globe, “India can’t remain insulated,” he said.
One-month dollar-rupee forwards are climbing for a fifth straight week and have reached an all-time high of 75.63. The rupee closed at 74.2175 per dollar, near a record low of 74.4825 set in 2018.