Ajay Mahajan of Yes Bank thinks that the current pressure on the rupee is driven not just by domestic factors, but also because of sympathy with the rest of Asia reeling under higher import burden of rising oil prices. This would pressurise the Rupee for a while, he told CNBC-TV18. “I think if the Rs 41.70-42/USD zone is violated in the next year or two, then we could see the dollar-rupee potentially making a bit further up to about Rs 43/USD levels,” he said.

According to Mahajan, the Indian Rupee market historically has always been a one way market - when dollar rupee goes down, all exporters wants to hedge their receivable positions, not just for the year but also for the future contract which may have cash flows happening even in the second and the third year.

Mahajan said, “We had seen in the last one or two years that the dollar-rupee market saw a lot of export flows, while importers kept their positions completely open. In a momentum market like this, when you see the rupee slipping 0.40-0.50 paise a day, the exporters cancel their previously sold obligations, as well as importers come into rush into cover. So it’s not a balanced market at the moment. There is a bit of panic and I think most exporters would possibly be cancelling their positions.”