On the levels he sees for the currency, Agam Gupta of Standard Chartered Bank says it will not see 55.75-56/USD in the next three-six months.
The rupee took most analysts by surprise by touching 55.41/USD , a six month low on Tuesday. Agam Gupta of Standard Chartered Bank cautions that the Indian currency may slip below 54.50/USD by June.
"Our official forecast has been at 54.50 for June end. There is a risk to our forecast. But I don't see it going much higher than 55.75-56 in the course of the next three-six months," he told CNBC-TV18.
Meanwhile, he expects the Reserve Bank of India to intervene and sell dollar if the rupee sees a level of 55.5-56 in order to stabilise the currency.
Below is the edited transcript of Gupta’s interview to CNBC-TV18.
Q: 55.40/USD is where the rupee is at. We have been asking a lot of experts about their range or their expectations going ahead. Where do you see the rupee by say mid-year, by about June or so?
A: Our official forecast has been at 54.50 for June end. Obviously, the move has taken people by surprise. Primarily, the reason has been that people have been expecting a stable-to-appreciating bias for the currency and the trade deficit thus show that that the import demand still is strong in the month of April and probably in the month of May. So, there is a risk to our forecast of 54.50. But I don't see it going much higher than 55.75-56 in the course of the next three-six months.
Q: How are we placed in terms of the Indian Rupee (INR) movement as opposed to other currencies say our Asian peers, is there a higher volatility that we are seeing in the rupee depreciating vis-à-vis possibly the Ringgit or the Thai Baht? What is the correlation that we are spotting at this point?
A: If one looks at the month of May, the rupee has depreciated more against the dollar than the other Asian currencies, which primarily has to do with the fact that we have moved pretty rapidly in the last couple of days. So yes, we have weakened a bit more than the Asian currencies, but it is not substantially or significantly more.
Q: It maybe too soon, but do you think the Reserve Bank of India (RBI) will look to step in any point in time inorder to calm the markets by selling dollars or so, something that they have done repeatedly in the past?
A: Yes, the RBI will definitely be keeping a watch and their stated objective is to maintain stability in the currency market. They definitely will be looking to sell dollars between 55.50-56 to stabilise the currency, I think that’s pretty a much given.
A: The biggest support factors are the capital inflows, both on foreign direct investment (FDI) and foreign institutional investor (FII). We have capital inflows both on equity and debt, so that’s one big positive, which we are seeing playing out and I think that will continue.
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