Options traders are bullish on the rupee, believing that the currency is strongly positioned for a selloff when central banks begin to pull back on stimulus money.
According to Bloomberg:
With the current account gap narrowing significantly, inflation at a record low and reserves at all-time high, India is less exposed to the risk of outflows when authorities raise rates, according to Mizuho Bank Ltd. That’s a contrast from 2013, when the Federal Reserve’s hint of an end to stimulus sent the rupee tumbling along with other emerging-market currencies.
The bullish sentiment is reflected in the derivatives markets. One month put options cost 0.72% more than call options. In July, that number was 1.16%. Kartik Goyal states:
The so-called risk-reversal rate has dropped 25 basis points this month, the most since March, and compares with a decline of four basis points for China’s yuan and 12 for South Korea’s won.
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This year, India's curreny is up over 5% versus the US dollar.
So what do you guys think? What other currencies are you looking to withstand global quantative tightening?
