By Jaspreet Kalra and Nimesh Vora
MUMBAI, April 2 (Reuters) - The Indian rupee is not expected to see sharp swings following U.S. President Donald Trump's expected reciprocal tariff announcement on countries including India, multiple market indicators showed.
The dollar/rupee spot rate, hedging costs, and option volatility suggest that rupee traders are relatively sanguine about the risks from the upcoming tariff announcement, which investors fear could intensify a global trade war.
While the rupee would be vulnerable to the headline risk around the tariffs, BofA Global Research expects limited impact over the medium-term.
India will be more resilient to Trump's tariffs than other emerging markets, driven by constructive domestic factors, according to J.P. Morgan Private Bank.
"We see a bottoming of economic momentum in sight," said Alex Wolf, head of Asia investment strategy at J.P. Morgan Private Bank. A sharp slowdown in economic growth had weighed on Indian stocks and prompted foreign investors to pull out, hurting the rupee.
RUPEE NEAR YEAR-TO-DATE HIGH
The rupee has rallied about 2% against the U.S. dollar over the last two weeks, wiping off its year-to-date accumulated losses and significantly outperforming to its Asian peers.
The Indian currency hit a year-to-date high of 85.40 last Friday and was quoting at 85.6050 at 11:00 a.m. IST on Wednesday.
HEDGING COST AT MULTI-MONTH LOW
The cost of hedging the rupee - reflected in one-month forward points in both the non-deliverable forward and onshore markets - has been subdued in the lead up to Trump's announcements.
If rupee traders were concerned about the impact of the tariff plans, increased hedging activity would have driven forward points higher.
OPTIONS MARKET
Options market data indicates that the cost of placing bearish bets against the Indian rupee, relative to bullish wagers, has decreased to a multi-month low, while short-term volatility expectations are relatively low.
The notional value of over-the-counter dollar-rupee (USD/INR) options traded in the U.S. was also muted heading into Trump's announcement.
Rupee strengthened sharply in March 2025 https://reut.rs/42l2KOL
Cost of hedging against rupee weakness remains muted https://reut.rs/3Ycl8XG
Option activity on rupee muted in lead up to U.S. tariffs https://reut.rs/4hVqWfm
Cost of USD/INR call options relative to put options has declined https://reut.rs/4iOfaEB
(Reporting by Jaspreet Kalra, Nimesh Vora; Editing by Janane Venkatraman)
((jaspreet.kalra@thomsonreuters.com; +91-8769636545;))
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