Re may break 33 levels in Q1: UBS

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS US dollar gets whack against other major currencies Strong inflows likely in early Jan: IndusInd Bk Re may weaken, but not beyond 39.85: HDFC Bk Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Nizam Idris , Director of FX Research and Strategy at UBS believes the dollar recovery is gradual and the outlook is less clear. This is not a turning point for the dollar yet, he said to CNBC-TV18. On the other hand, he is positive on the rupee , and said it may break 33 levels in Q1.

Excerpts from CNBC-TV18's exclusive interview with Nizam Idris:

Q: A couple of global reports suggest that the dollar may have snapped its two-year bear run, would you go with that? And do you think it is going to be a sweeping achievement for it across currencies?

A: I think there has been quite a number of bad news recently that dollar is positive because higher reservation may be a positive for the dollar, given an event of global recession would probably mean US treasuries would be the preferred assets.

But despite of these news, I think the recovery in the dollar has been very gradual. I wouldn't think 2.5% recovery matches or compares significantly to the kind of fall in the dollar over the last couple of years. So to me, it's just a small recovery. I have to say that the outlook for the dollar is obviously less clear than what it has been over the last two years, previously it has been a clear weaking trend. I think outlook is less clear right now, but I wouldn't also say that this is the deterring point for the dollar just yet.

Q: What is your sense that what you may do in the near-term for March FY08 perspective what's the call on the rupee-dollar?

A: We are quite optimistic on the rupee to be honest, I think the RBI has been intervening quite aggressively at 39 keeping the dollar-rupee above that level for now. I think they have the luxury of that doing for now, given that inflation has been quite benign, but inflation is rebounding off the 3% mark and in my opinion it is that it will start to move higher from April onwards.

So I think the pressure would then be for the RBI to tolerate stronger rupee going forward and intervene less in preventing money supply from going out. So in general, I'm rupee positive, probably we could see 33 breaking maybe within the first quarter of the year.