Mumbai: Over the past week, the US 10-year bond yield has topped the 5% mark for the first time in 16 years and Reserve Bank of India (RBI) officials have warned of the cascading turbulence that a strengthening dollar could wreak on emerging markets. The rupee, however, seems to be far away from the global maelstrom.
Based on multiple gauges, the rupee’s volatility is at multi-year lows. Using spot returns as the benchmark, the unit has outperformed nine Asian currencies, some of which have shed as much as 8% versus the US dollar so far in 2023, Bloomberg data showed.
The rupee has depreciated a mere 0.5% against the dollar so far in 2023. “The volatility within USD/INR has declined to its lowest levels in the last 3 years. As measured by the rolling 6 months standard deviation of daily levels of USD/INR, volatility peaked to significantly high levels by Oct’22. However, it had been on a steady decline since then, for 10 straight months,” said Debopam Chaudhuri, Chief Economist, Piramal Group.
RBI’S GUARDRAILS
The stability of the rupee has been ensured by the RBI, which has exercised a carefully plotted strategy of market interventions to prevent swings in the currency amid the ebbs and flows of foreign investment over the past six months. While the RBI net purchased $23 billion in the spot market from April to July amid overseas inflows worth $18 billion into equities, in August, the central bank sold $3.86 billion, its largest sale in eleven months, latest data showed.
