FxWirePro: Options sentiment suggests further rise in USD/INR

The Indian rupee has weakened steadily after reaching after reaching 69.3 area per USD, which was the highest level for the currency since August 2018. The rupee is currently trading at 71.1 per USD, and options sentiment suggests that further decline could be in store.

According to data from National Stock Exchange, retail sentiment seems to be betting on a bearish USD against INR. Based on volume, the latest put-call ratio (PCR) is at 1.56 area. The PCR is widely used as a contrarian indicator, and the fact the volume is higher in the put options suggest a further rise in USD against the Rupee.

A recovery in oil price and a rising euro are likely to act as a bearish factor for the INR as sizable chunk of corporate dollar debts were converted into euro from the USD, in the aftermath of 2013 rupee crisis, where it plunged against the USD triggered by then-Federal Reserve chairman Ben Bernanke’s hint of a policy reversal.

As the USD has been gradually weakening against the USD since last week, the PCR has been moving higher. Yesterday the ratio was at 1.41, and around 1.3 on Friday.