Gold Silver Reports — Crude Oil, Gold Likely to Cost Less with Rupee Poised to Strengthen — Imported commodities like gold and crude could cost lesser in rupee terms if their price in dollars remains relatively stable over the short term.
This is borne out by currency options data on NSE, where odds of the dollar breaking below a key support in the short term appear to have increased significantly . Dollar rupee options expiring two weeks from now show the dollar faces considerable resistance at `67.50 whereas chances of it breaking the support of `66.50 appear fairly stronger. RBI reference rate was `66.58 on Monday . A stronger rupee offsets the rise in dollar price of imported commodities and accentuates their fall if dollar price declines.
The 66.50 dollar put option expiring on October 26 witnessed a 9% rise in open interest (OI) traders’ outstanding positions over two trading sessions through Monday . The OI which was 3,18,139 contracts on Friday jumped to 3,45,409 contracts Monday as the option’s price rose 56% to over 12 paise.
A rise in OI accompanied by a price increase signifies long positions being built. At times, rise in OI can be interpreted to mean that option sellers don’t believe that the rupee will strengthen more than 66.38 (66.5-0.12) to the dollar till October. But chances of a break to 66 look stronger for now, feels Viral Shah, head of commodity and currency , Geofin Comtrade.Expectations of the dollar breaking above a key resistance of 67.50 by October end receded overnight on Monday after a few dollar call option buyers liquidated their long dollar bets as the price of the option halved to around 3 paise.Here the seller of dollars at 67.50 profits (from buyers) in case the dollar remains below 67.50 plus the price of the call to the local unit by expiry. “The bias seems to be towards a stronger rupee for the short term,“ said Suresh Nair, director, ADMISI Forex. “It helps as crude and gold get cheaper and is more conducive to FPIs who are huge investors into Indian equities.“ — Neal Bhai Reports