Rupee volatility drops sharply

 

 

 

 The rupee slipped to below 60 to a US dollar on Friday, the lowest in eight months due to capital flows into equity markets and optimism of a stronger government after the general election. Along with strengthening 15% from its record low in August, the changes in the currency are also less volatile. The rupee’s volatility, measured by standard deviation on a three-month rolling basis, has declined sharply since September. Mint had written at that time how the Reserve Bank of India (RBI) failed to curb volatility in the currency market owing to a drying up of volumes and any small intervention by RBI was leading to sharp intra-day moves. Since then, RBI has been shoring up dollar reserves, which has eased volatility. That, coupled with the selling of dollars by exporters, has increased liquidity in the currency market.

 

MUNTAZIR ALAM

2ND SEM