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May 24, 2012, 12.44 PM IST
The rupee opened weaker today. In an interview to CNBC-TV18, Ashok Gautam, senior vice president and head, global markets, treasury, Axis Bank says, 56.20 was a very critical resistance for rupee, but that has been taken out with quit ease today. “Now, the room is open for 57 to 57.20 levels," he adds.
In an interview to CNBC-TV18, Ashok Gautam, senior vice president and head, global markets, treasury at Axis Bank says, 56.20 was a very critical resistance for rupee, but that has been taken out with quit ease today. “Now, the room is open for 57 to 57.20 levels. I am hoping that 57 or 57.20 will be held,” he adds.
Below is the edited transcript of his interview with CNBC-TV18's Sonia Shenoy and Ekta Batra. Also watch the accompanying video.
Q: Have we passed critical support levels for the rupee now? What is the next level that you would be watching out for keenly?
A: We have been maintaining that 56.20 was a very critical resistance for rupee, but that has been taken out with quit ease today. Yesterday, I think twice the attempt was made to breach it, but today it has been taken out. Now, the room is open for 57 to 57.20 levels.
We will have to see actually how the events unfold going forward, whether those levels will be held. I am only hoping that this time it has already seen a weakness bout in a very sharp manner. I am hoping that 57 or 57.20 will be held.
Q: Events is the key word that you used because we have seen a lot of that happen. Today, we saw that token petrol price hike, but tomorrow there is an expectation that perhaps the government would move on diesel etc. Do you think that there is a potential of the rupee to see a recovery, if we do get any such reforms news or do you think that the demand-supply pressure will continue to weigh heavy on the rupee?
A: There are a few things happening. Demand-supply situation is the real thing. It is a culmination of so many things, which have been happening, both internationally and nationally. Some of the measures, which you are talking about, will certainly help.
At this point of time, demand and supply is something which I am seeing is driving the rupee to weaker levels. We don’t see enough supply coming in the market. There has been a talk whether Reserve Bank of India should take care of the big ticket dollar buyings directly so that doesn’t come to the market and has a spiraling impact on the rupee weakness.
I am sure they would be weighing those options certainly. That remains a very critical thing for them to see whether the big oil import or maybe big government expenditure, maybe on the defense side, whether these can be taken off from the market and Reserve Bank of India can directly service them.
Q: Why haven’t the RBI measures actually made a significant impact on the rupee depreciation? Why hasn’t it made a significant impact on the rupee depreciation or has it, for example if the RBI hadn’t intervened we would have seen a sharper depreciation?
A: I was going to say the second line. We are not sure whether it has had an impact or not. It is quite possible it has had an impact, otherwise we could have seen the faster weakness. The delinking of the currency futures market, there have been some discussions in the market regarding this move for some time. Now that this move has come, okay we will see how it impacts because those positions are still in the market and RBI has given time till June 30 for those positions to be taken off the books or bring it below the limits which Reserve Bank of India has set. These are some of the things which Reserve Bank of India has taken.
Some weakness, which is there, is one because of the dollar strength worldwide. So, this is inevitable. Number two, there is nervousness in the in the world market because of what is happening in the Euro zone.
Q: In your sense how many years or months, do you think it would take for the rupee to see that recovery all the way back to that sub-50 levels or even 48 levels? Do you think it could take one or two years or maybe it would come even sooner?
A: It can come very soon. In my belief, this pace shouldn’t have been there. This is rather, if I can use the term, unwarranted in that sense. So, it is rather sharp. So, what I believe that if the reversal has to take place and it takes place say around 57 level and if that level is held then reversal also will be very fast.
Q: What currency analysts are talking about, traders are talking about with regards to the RBI stepping in more aggressively? Which is the step that you would like to see the RBI to come out with? Which level do you think should be protected aggressively?
A: I really don’t like to answer this particular question because RBI is the right entity to answer that question. Let us put it this way. I am quite sure that RBI is continuously in the market. They are watching what is happening in the market. At appropriate levels, they keep coming in. This is what we have been seeing throughout.
RBI has been on record to say that they don’t target a level. They only smooth in, that there is no very sharp volatility. Whenever there is depreciation, they smooth in that depreciation. So this has been their stand. We will take that stand as the correct stand at this point of time.
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