May 24, 2012, 12.57 PM IST

See rupee in 55.80-56.40/$ range today: IDBI Bank

In an interview to CNBC-TV18, NS Venkatesh of IDBI Bank says, the petrol price hike, which has been announced, may improve the sentiment. However, he says, the structural problem still persist. “It may trade between 55.80 and another low of around 56.40 levels during the day,” he adds.

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Yesterday, rupee continued its free fall for the sixth consecutive day. It breached the psychological mark of 56 to the dollar on heavy buying from oil marketing companies and following weakness in the euro.

In an interview to CNBC-TV18, NS Venkatesh of IDBI Bank says, the petrol price hike, which has been announced, may improve the sentiment. However, he says, the structural problem still persists. “It may trade between 55.80 and another low of around 56.40 levels during the day,” he adds.

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

Q: We have seen a petrol price hike, how do you think the rupee will move today?

A: I think the petrol price hike, which has been announced, may improve the sentiment. But considering the fact that the structural problem still persists, I believe the rupee is likely to open weak against USD. Yesterday, it closed at 56 after touching 56.21.

The other worrying factor is the euro has breached the technical of 1.26. It closed at around 1.25. All these factors will play upon the minds of the currency traders. I think the rupee is likely to open weak. It may trade between 55.80 and another low of around 56.40 levels during the day.

Q: What kind of a target do you have for the end of the Q1?

A: The government has started acting. I think they will start rolling out measures to cut down the fiscal deficits. That may improve the sentiments. With Greece issues being tackled where they are saying that they require Greece for the Euro zone and they are also talking of growth with stability and all, I think maybe the risk off aversions will go away and maybe slowly the risky assets will be picked up.

If that is the case then you will see reverse flows coming into the market from the FIIs and a little bit of tweaking in the FDI policy will also bring in capital flows. Ultimately, the structural problem needs to be addressed. The current account deficit still persists. But the oil prices are coming down. In the Budget, they have put a target of USD 115 per barrel. Currently, oil is around USD 106 per barrel. It is expected that with China soft landing, maybe oil could be touching USD 100 per barrel. If that is the case then maybe you will see the fiscal deficit being managed properly. If that is the case then you will see more flows coming in to support the growth of the economy.