Strengthening dollar has pulled the Indian currency to nine- month low of 56.18/USD. The rupee may see 57/USD in few weeks but will pullback to 55.50, says Agam Gupta.
Agam Gupta of StanChart Bank feels that the rupee may touch 57/USD in coming weeks, but will not sustain there and will pullback to 55.50. The rupee on Wednesday, lowered sharply against the dollar breaching the 56 mark .
"Strengthening US dollar is the main reason for this depreciation and not expectations of weak gross domestic product (GDP) numbers that would be announced on Friday," he said in an interview to CNBC-TV18.
Further, if the Indian currency moves in isolation and not in tandem with global fundamentals and other currencies then the Reserve Bank of India (RBI) will step in to curb the volatility.
Below is the verbatim transcript of Agam Gupta's interview on CNBC-TV18
Q: Is it just the month-end dollar demand which is adding pressure on rupee or do you think it could be a more deep-rooted issue, expecting weakness from the GDP numbers that will come out on Friday? What is your view on the weakness that we are seeing on the currency today?
A: The current move is more to do with global factors. It is going in line with dollar strength happening in the light of strong US data coming out, which is building expectations of an eventual tapering of the Fed quantitative easing (QE) program and that is driving the currency right now. It is general dollar strength across the board.
Q: Earlier, you mentioned not to see the rupee testing 57 or rather sustaining at 57, the lows that we had touched on an all-time basis for the Indian national rupees (INR). Have you changed your stance considering the rapid depreciation that we have seen? Would you still hold the fact that maybe rupee will be saved from the 57 mark?
A: Considering the rapid depreciation of the currency, at the moment, we have broken through a very crucial level of 56 today morning, which was holding last week and the perception that it would hold. Once that is broken, we can see demand emerging just below 56 if we dip down there in the coming days.
There is a chance that we test 57 as well. I do not see it sustaining above that, but the market is moving fast, so in the coming weeks there is a chance we trade 57, but I do not think we will sustain there and we should pullback from there back towards 55.50.
Q: Do you see the Reserve Bank of India (RBI) step-in at any point to calm the markets and prevent further depreciation?
A: The RBI will continue to smoothen the flow and will come in when there is excess volatility. If the INR is moving in isolation and not in line with global fundamentals then you will see RBI coming in to smoothen the volatility or curb the excessive move. But if it is a general dollar move happening across currencies they will not come in to defend at any level, but will continue to come in to curb excess volatility.
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