Over the past few weeks, the Indian rupee has been the star performer. While the euro, pound, yen, Swiss franc declined against the USD, the Indian rupee has gained more than a percent since last week.
The option sentiment measured by the put-call ratio, which is very effective as a contrarian indicator in determining the next move in USD/INR suggests that rupee could gain further.
- The Indian rupee has been gaining against the USD since bottoming around 71.8 per USD, despite the Reserve Bank of India reducing the interest rate by 25 basis points, and suppressing the yield spread.
- The rupee is currently trading at 70.95 per USD and option sentiment suggests further downside.
- The put/call ratio, calculated using volume data from National stock exchange is currently at 0.65, which suggests that the retail sentiment is extremely skewed to the upside, which strongly suggests a further decline.
- The rupee could gain to as high as 70.3 against the USD in the near term.
Chart created in Tradingview.com