Rupee calm on RBI move, Fed talks key to stability: HDFC Bk

The main reason for the recovery of rupee today was the aggressive selling of dollars by the Reserve bank of India through nationlaised banks, says Ajay Marwaha of HDFC Bank.

Speaking to CNBC-TV18 about the FOMC meet on September 17, he says one would expect the Federal Open Market Committee to make an announcement to start tapering and most emerging markets are already geared for that. But in the absence of any incremental announcement, the way market is moving, rupee is likely to be under pressure, he adds. Also Read: Rupee to stabilise in 15 days; Coal India must buy: Ambit
Meanwhile, he expects the US non-farm payroll data to be strong. According to him, whatever evidences the market has seen so far out of the US data, they will have some impact across all emerging markets including the rupee. Below is the verbatim transcript of Ajay Marwaha's inetview on CNBC-TV18

Q: What has been the impact of the Reserve Bank of India clarifications on overseas direct investment which has come in directly on the rupee?
A: A lot of the stability has come in from very aggressive selling from the domestic banks this morning which to a large extent corrected the big move this morning.
The clarifications are not only on the overseas direct investment (ODI) but on all aspects of the liberalised remittance scheme as well as the ODI and those are answers to some of the questions that were raised after it came out.
Most of the people would have thought that it would not apply to transactions that are in the pipeline, it is a confirmation so all of that has augmented the actions of the dollar selling and that is why we have seen some stability at least now. Q: Do you think the currency can gain a bit more? Can it move towards 65 and stabilise there or will it be too early to talk about that?
A: It is a little early to talk about that. There has been a lot of speculation over the last couple of days on a scheme for bulk dollar kind of inflows through the non-resident route.
We have to wait for those announcements to come in but overall the sentiment now seems to be converging to a point where there are a lot of expectations on the next set of measures.
I am just hoping that the expectation is not benign because then again one will see capitulation. If those expectations are met then there is a good chance that the rupee will continue to remain stable to appreciate. Q: What would your strategy for the rupee ahead of the Federal Open Market Committee (FOMC) policy this month?
A: Most of the data that had come out over the course of last one week suggests that the US economy is pretty much on track and if one extrapolates that into September 17 then one would expect that the FOMC would make an announcement to start tapering as is expected.
Most emerging markets are geared for that and so, there is a lot built into the price, it is impossible to estimate exactly how much is built into the price. There would be some impact and it is important therefore to know and to understand what kind of scheme, what kind of actions we see from the government.
In anticipation that would then give a balancing factor to the rupee. In the absence of any incremental announcement and if we stay on course and things go into September 17, the way we are, the rupee will then be under pressure for sure. Q: What about the non-farm payrolls data this Friday?
A: There is expectation that non-farm payroll data is going to be strong. I see no reason for it not to be strong from whatever evidence we have seen so far out of the US data and that will again have some kind of impact across all emerging markets including the rupee.
We have to be careful about over estimating its impact and that is all because there is a lot that has gone in the price action over the last 2-3 days. If one sees measures from the government, it is imminent that rupee should remain steady but otherwise if there are no measures at all, pressure will definitely come in from any kind of positive dollar development.