Market News

By Nimesh Vora

MUMBAI (Reuters) - The Indian rupee rose on Wednesday, defying tepid sentiment across Asian markets, with traders noting that the bearish bias in options has faded.

The rupee was quoting at 88.00 to the U.S. dollar, up 0.18% on the day. The local currency advanced despite weakness in Asian peers and a rally in the dollar index to 98.50.

Bankers noted that the options market is signalling less near-term downside pressure on the rupee after it breached the 88 level last Friday.

In particular, the 1-month USD/INR risk reversal, which had shown dollar calls trading at a premium to puts when the rupee breached the 88 mark, has now flattened, indicating lower demand for downside hedges on the currency.

"The slight skew that was favouring dollar calls has disappeared, which is not surprising when you consider the price action post Friday's breakout (for USD/INR)," an FX derivatives trader at a private sector bank said.

He noted that while the rupee hit a fresh all-time low of 88.33 on Monday, the move was largely orderly and did not trigger undue stress.

On Tuesday, the currency rallied to 87.85 before dipping, and on Wednesday it pushed higher again to retest 88, underscoring that price action over the past three sessions has been contained.

DOLLAR FINDS BUYERS

The dollar index rallied 0.66% on Tuesday and inched up further in Asian trade on Wednesday amid fiscal concerns in several major economies, especially the UK and Japan.

Britain's 30-year borrowing costs rose to their highest levels since 1998, highlighting investor anxiety about the UK's ability to keep its finances under control.

(Reporting by Nimesh Vora; Editing by Sonia Cheema)