The rupee closed at 85.33 against the U.S. dollar, down 0.3% on the day.
The South Asian currency has experienced choppy moves over recent trading sessions, quickly reversing course from a fall past 86 last week to touch a two-week high of 84.78 on Monday and then shedding those gains in the face of a firmer dollar.
The rupee’s very-near-tenor implied volatility – a gauge of future expectations – has also ticked up, with the spot-week gauge rising above 6%. The year-to-date average is around 4.5%.
The rupee seems to be “settling into an 84.80-85.80 range and unless it breaks out on either side, the choppy moves may persist,” an FX trader at a foreign bank said.
The dollar index was up 0.4% at 99.3 while the 10-year U.S. Treasuries rose, mimicking a steep price rally in longer-term Japanese debt that came after Reuters reported Tokyo will consider trimming issuance of the super-long bonds. Despite the uptick on Tuesday, the dollar is on course to notch its fifth consecutive monthly decline against major peers as worries over uncertain trade policies and worries over fiscal health hurt appetite for U.S. assets. In many ways, the dollar is “behaving more like an emerging market currency, where investors are fixated on public finance sustainability, watching capital flows closely, and forced to factor in unpredictable policy moves,” ING bank said in a note.
Asian currencies declined on Tuesday, with the offshore Chinese yuan down 0.2%. The Malaysian ringgit led losses with a nearly 0.5% fall.
India’s benchmark equity indexes, the BSE Sensex and Nifty 50 ended lower by around 0.7% each, tracking a fall in most regional stocks.
