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USD/INR 3-month risk reversals at highest since Oct. 31

Risk reversals on the USD/INR jumped to six-week highs yesterday, indicating investors are adding bets to position for weakness in the Indian National Rupee (INR).

The three-month risk reversals (INR3MRR) rose to 1.013 on Tuesday in favor of USD/INR calls (bullish bets). That is the highest level since Oct. 31. Notably, risk reversals stood at 0.637 just five days ago.

More importantly, USD/INR has dropped to 72.00 at press time - down 27 paise from the previous day's close of 72.27. The risk reversals, however, continue to hover near 6-week highs, meaning the options market is likely expecting the INR to reverse gains and resume the slide.

The risk reversals provide a measure of how much of a premium there is for puts vs calls. A positive number indicates the premium (or demand) for calls is higher than that for puts.


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