Rupee Trades In Tight Range As Volatility Expectations Ease

The Indian rupee moved within a tight band on Wednesday, reflecting a balance between a softer U.S. dollar and persistent corporate demand for dollar hedging. The rupee was quoted at 90.53 per dollar at 11:15 a.m. IST, marginally stronger than its previous close of 90.5775.

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After a brief relief rally last week, the currency has stabilised in the 90–91 range. The earlier rebound followed the announcement of a U.S.-India trade agreement, which helped ease immediate pressure on the rupee and reduce uncertainty in the foreign exchange market.

Volatility Measures Cool After Recent Spike

Short-term volatility indicators declined after jumping sharply last week. One-month implied volatility, a key measure of expected currency movement, eased to 4.3% on Wednesday after rising to as high as 5.7% in the previous week, based on market data cited by Reuters.

The moderation in volatility followed the rupee settling into a defined trading range, reducing expectations of sharp near-term moves. These market participants were keeping a close watch on these indicators as they were highly active after the announcement of the trade deal.

Global Cues And Dollar Movement

The rupee’s stability coincided with weakness in the U.S. dollar. The dollar index, which tracks the greenback against a basket of major currencies, fell 0.3% to 96.6 during Asian trading hours. Other Asian currencies also edged slightly higher.

Investors remained cautious ahead of key U.S. labour market data scheduled later in the day. Market estimates expect U.S. nonfarm payrolls to rise by 70,000 in January, while the unemployment rate is projected to hold steady at 4.4%.

Equities And Capital Flows In Focus

Indian stocks displayed relatively low changes; the Nifty 50 index remained steady throughout the session. Currency traders also monitored foreign portfolio investment trends after a shift in flows this month.
Foreign investors have purchased more than $1.5 billion worth of Indian equities so far in February, reversing net outflows of about $4 billion recorded in January, according to market data. The improved flow picture has provided some support to the rupee despite global uncertainties.

Corporate hedging demand continued to influence intraday currency movement, keeping the rupee range-bound even as external cues remained mixed. The lower dollar value, steady stock market, and easing volatility all contributed to a lackluster trading pattern of the currency throughout the session.