Indian rupee takes comfort in oil prices, Fed outlook amid equity selloff

The Indian rupee was little changed on Wednesday, as a slump in oil prices and the dovish Federal Reserve outlook countered the poor risk mood.

The currency was at 83.9575 to the U.S. dollar at 10:40 a.m. IST compared with 83.9625 in the previous session.

Brent crude dipped in Asia, adding to Tuesday's near 5% drop, on concerns over the demand outlook. Indian equities dropped 0.7%, joining the selloff fuelled by worries over U.S. slowdown. "We know it takes a lot to move the rupee. The risk off is obviously not sufficient," a currency trader at a bank said.

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The rupee has been in a narrow 20-paisa range over the last month, pushing the 30-day realized volatility to near 1%.

"As long as U.S. jobs and inflation remain broadly in line, rupee is unlikely to break out of the range and sustain any kind of momentum," Srinivas Puni, managing director at QuantArt Market Solutions, said.

Amid this deadlock, we recommend a disciplined hedging program, with vanilla and some safe exotic options like knock-out forwards to manage the risk, he said.

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