Rupee will strengthen today; 60.20/$ likely: DBS

After the rupee weakened to 60.80 against the dollar on Thursday, the Finance Ministry is likely to announce measures to strengthen the rupee today. These steps could include hikes in ECB caps, greater rupee refinancing, quasi sovereign bond issues especially by PSUs with surplus cash.

In an interview to CNBC-TV18, Arvind Narayanan, Head of Sales, Treasury & Markets at DBS Bank says the rupee may hold the 60.10-60.20 level against the greenback on the back of these steps to aid the currency.

"I see a lot more happening in the interest rate side; there could be interest rate hikes possibility and thankfully data from China has been good. So, we will possibly see some strengthening in the rupee coming today and that combined with some discussion on the rate hike stocks should be the first set of sessions now," adds Narayanan. Below is the edited transcript of Narayanan's interview to CNBC-TV18. Q: What is the sense that you are getting about what the kind of steps that maybe announced by the finance ministry today?
A: The most obvious step is the discussion towards the bond but my personal sense is that that may take some more time. Coming out with a bond in this market is not in an easy decisions, so that would be lower in the priority of the Reserve Bank of India (RBI). I see a lot more happening in the interest rate side; there could be interest rate hikes possibility and thankfully data from China has been good. So, we will possibly see some strengthening in the rupee coming today and that combined with some discussion on the rate hike stocks should be the first set of sessions now. Q: On that point that we could see some bit of sense coming to the rupee early this morning, what about those who are sitting on long dollar. Do you see some kind of unwinding or some kind of pressure that could give further leg up for the rupee?
A: There are not too many people sitting long dollars anymore because if it’s expensive to sit long. Additionally, liquidity is being squeezed from all sides. So, by and large people who are buying dollars are genuinely doing it for commercial reasons or for underlying purposes by oil imports or defense payment and so on. There should not be a lot of unwinding per se but yes, whatever little positions are there on the long dollar side, it would probably get unwound but I would not call for a significant down move on the dollar-rupee. I would still think 60.10-60.20/USD should hold for now.