In an interview to CNBC-TV18, Moses Harding of IndusInd Bank shared his outlook on the rupee's movement going into the next year. He sees the Indian currency hovering in the 54-56/USD range till the Union Budget 2013. The rupee closed at 55.06/USD on Friday.
"The dynamics are that there is resolution to policy paralysis. There is resolution to the weak macro-economic fundamentals. So, that gives a positive mode to arrest rupee weakness beyond 56/USD," he adds.
Below is the edited transcript of Harding's interview to CNBC-TV18.
Q: What would be the levels that you would be watching out for the rupee? Do you think there could be more depreciation or some amount of an upside?
A: The Rupee has settled into a comfortable 54-56/USD range into the short-term, till Budget session or end of March 2013. The dynamics are that there is resolution to policy paralysis. There is resolution to the weak macro-economic fundamentals. So, that gives a positive mode to arrest rupee weakness beyond 56/USD.
The RBI and the government is trying its best to pull inflows through capital account, to bridge the current account gap. So, overall the Indian economy weakness should set-up the bullish undertone. Given the trade gap of USD 18-20 billion a month, it may not allow the rupee to appreciate beyond 54/USD. So, 54-56/USD is the trading range for the next two to three months. For the next one week, we would see good demand below 54.60/USD and good dollar supply above 55.60/ USD.
I will look at 54.60-55.60/USD as trading range. For exporters, close to 55.50/USD level is too good to miss. So, I expect good dollar supply from exporters around 55.50/USD level and below 54/USD level. Not only the exporters, I think it would be good for RBI to buy dollars to provide rupee liquidity into the system and shore up its dollar reserves and make this firepower strong to protect rupee weakness if any.