The Indian rupee has been on a downward slide against the US dollar, with the options market indicating a potential further decline to 87 per dollar by the end of March. This projection is based on market estimates derived from implied volatility data, which suggest a higher likelihood of the rupee weakening rather than recovering in the near term.
Several factors are contributing to the rupee’s depreciation, including a strengthening US dollar and rising volatility in the foreign exchange market. Traders are taking bearish positions on the rupee through various options strategies, such as topside call spreads and digital calls, indicating a sentiment of continued dollar strength.
The recent record lows of the rupee have prompted analysts to adjust their forecasts, with Standard Chartered revising its end-2025 forecast to 87.75 per dollar. The new central bank governor’s approach to managing the currency’s fluctuations is also a factor influencing market expectations.
Despite the bearish outlook on the rupee, some experts believe that any depreciation will be gradual compared to other Asian currencies, thanks to India’s stable economic fundamentals. However, the trajectory of the rupee will ultimately depend on factors such as US economic data and Federal Reserve policy decisions.
In conclusion, the current trends in the options market suggest that the rupee is likely to experience further downside pressure in the coming months. Traders and investors will closely monitor economic indicators and central bank actions to gauge the currency’s future direction.