MUMBAI, June 27 (Reuters) - The Indian rupee inched up on Tuesday, thanks to the yuan-led recovery on Asian currencies on indications that China's central bank may be uncomfortable with the pace of the decline.
The rupee was at 81.9650 to the dollar by 11:02 a.m. IST, up from 82.04 in the previous session. The rupee's 30-day realised volatility remained below 3% and the 1-month implied volatility was at 3/3.2.
"Implied volatility in USDINR options are hovering near 15-18 year lows across tenors," Anindya Banerjee, head research - FX and interest rates at Kotak Securities, said.
"Option sellers can concentrate on strategies such as the short straddle, short strangle."
A short straddle involves selling a put and call option of the same strike price and expiration date while a strangle involves selling out-the-money call and put options.
"Selling options, notwithstanding the current low implied volatility, makes sense till spot is in the now new 81.80-82.20 range," a derivatives trader said.
The offshore Chinese yuan recovered to 7.2180 to the U.S. dollar on dollar sales by state-run banks and the lower-than-expected USD/CNY fix.
It was likely a signal by the Chinese central bank that it reckons that the recent fall on the yuan has been too quick, analysts said.
The yuan lifted other Asian currencies and pushed dollar index lower.
Investors are eyeing U.S. data releases this week to gauge how many more times the U.S. Federal Reserve will raise rates. Futures indicate that investors are not convinced that the Fed will be able to follow through on its projections of two more rate hikes this year. (Reporting by Nimesh Vora; Editing by Janane Venkatraman)
