Strong dollar, FII sell-off to up rupee strain: HDFC Bank

The rupee touched an all-time low of 62/USD on the back of strong dollar demand. Forex market analysts believe that the currency may weaken more on the back of strong dollar demand. Employment data from the US has also been strong, which has led to this move, says Ashutosh Raina, head of FX trading at HDFC Bank.

The Reserve Bank (RBI) has introduced a series of measures since the last month to tackle the currency’s decline. Speaking on its impact Raina told CNBC-TV18 that genuine dollar demand has led to the else the RBI measures would have reduced the impact otherwise. Also, expectations of tapering of US central bank’s bond buying programme may keep the currency under pressure the next week, he adds. Also read: Rupee at 62 against dollar: Why RBI measures aren't working Below is the edited transcript of his interview to CNBC-TV18. Q: What resulted in the sharp sell off to that 62 mark? Was it stop losses that got triggered or was there genuine demand? Was there any kind of an intervention by the Reserve Bank of India (RBI) in that little bit of intraday pullback? A: The move today has been on the back of US data on the employment front. The stop losses have been triggered on the short side. However, it is more to do with the dollar strength than the local factors. Q: We have seen a slew of measures from the RBI. They have really thrown about almost everything into it. What else can they do? From the time they started those measures, it was sitting at 59 odd. On Friday, it even touched 62 level after such intense measures. A: The dynamics of current dollar-rupee movement is linked to the global dollar strength at the moment. So, it is not linked to any local factors at the moment. We (the rupee) are expected to weaken a bit, but the RBI measures substantially have reduced the impact otherwise. Q: There has been quite a bit of FII selling in equity market. Would you expect some more pressure to come back to Indian market from now? If there is a large FII sell-off in the cash market on Friday, would you expect pressure to come back to the rupee on Monday and Tuesday? A: Definitely after the US tapering expectations start increasing in the end of September. The FOMC meeting on September 17 will decide the tapering measures. The market is expecting some tapering to start in September itself. That is why there is such a global sell-off in equities. It is not only linked to India.