The Indian currency may touch the 56 level in medium-term on the back of strengthening dollar.
Jayesh Mehta, MD and country treasurer, Bank of America does not see rupee touching the 56 mark soon. However, he feels rupee may hover in 55.50-56 range in the medium-run due to global cues.
“Currently, we are trying to break 55 and that might break. It has nothing to do with India per se and is more about dollar strengthening, which is kind of depreciating and is something we don’t really have control on,” he says in an interview to CNBC-TV18.
Below is the verbatim transcript of Jayesh Mehta’s interview on CNBC-TV18
Q: What kind of levels are you working with? Does it seem the rupee would breach 55 which it has, at this point?
A: Yes, in fact with the commodities coming off and all that we thought in the range of 55, breaking would be difficult. It has definitely slowed down the depreciation pace because of the inflows, which is huge. Currently, we are trying to break 55 and that might break. It has nothing to do with India per se. It is more about dollar strengthening, which is kind of depreciating and is something we don’t really have control on and we will have to live with.
Q: It is a global effect on the rupee at this point. This is because if you look at the euro-dollar, euro at 1.28 levels, yen is weak and despite the S&P ratings, market seem to have digested that with the Nifty crossing 6,200. Is it just the rupee that seems to be shaken at this point?
A: Yes and that’s what we are seeing. If we were in this situation two-three months back, then currently the rupee because of the dollar strengthening would have been much weaker. The fact that we have flows coming both in debt and equity and that is definitely arresting the depreciation to a greater extent.
Q: What levels would you suggest for the next 15 days? There is also a month end dollar demand from oil companies that we have to factor in. Overall, would you see 56 for the rupee?
A: Doesn’t look like at this juncture, but we have to keep on watching, the dollar strengthening, where it stops. We were working with 53-55, 55 is breaking because of - again nothing to do with India, it is because of the global dollar strengthening. Maybe, we will just watch it, maybe at this juncture we will still look at 55.50 for the short-run, maybe in medium-run, we are looking at 56 because of global situation.