Re close to Dec lows; RBI unlikely to defend levels: Nomura

Vivek Rajpal of Nomura believes that importer demand for dollar is keeping rupee under pressure.  In an interview to CNBC-TV18, he explained, "Because the key levels have been breached, it is kind of leading to the pressure on rupee."

The domestic unit had lost 45 paise to close at a four-and-a-half-month low of 53.41/42 against the US currency yesterday, owing to strong dollar demand from importers amid weak equities.

Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.

Q: What has caused so much pressure through the last 48 hours on the currency and what kind of immediate downside risk are traders talking about?

A: I think it is becoming clearer to the market that seasonality-wise there is definitely a higher importer demand of dollar. FII flows are muted. Once those key levels are breached, like 53, naturally some technical flows also join the depreciation camps. Overall, because the key levels have been breached, it is kind of leading to the pressure on rupee.

Q: We are just about 60 basis points away from the record low of 54.30. Do you expect that to be reached or do you expect the RBI to come in and protect that level?

A: Given RBIs action over the past month or so, it looks like RBI is not eyeing at any levels. They are just trying to smooth the depreciation. They have been intervening but, in very small amounts.

Yes, they can intervene. But, in the face of flows, in the face of genuine dollar buying, etc, I doubt they are trying to defend any levels as such.