Expect rupee to touch 56.20/USD ahead: Axis Bank

In an interview to CNBC-TV18, Ashok Gautam, Senior Vice President & Head, Global Markets, Treasury, Axis Bank spoke about the mild  correction seen in the rupee which closed today at 55.73 against the dollar. The weakness is assumed to be because of the global woes of 'fiscal cliff' and 'euro-crisis'.

"At this point, maybe some respite at these levels is expected because these levels are very good for somebody who is holding dollars to sell. Nevertheless, we still believe that there is room for rupee to move upto 56.20/USD," he adds. Political resistance to reforms in India is also a big risk factor for the Indian economy and asset markets. The winter Parliament session so far has failed to reach a consensus on government reforms specially FDI in retail.  Below is an edited transcript of Ashok Gautam's interview on CNBC-TV18. Q: The rupee is down for the fifth consecutive session. What do you think of the consistent weakness in the rupee? What is the short-term trend on the currency now? A: We maintained that the rupee will breach critical level of 55.20, we will see weakness in the rupee and is very much evident now. At this point, some respite at these levels is expected because these levels are very good for somebody who is holding dollars to sell. Nevertheless, we still believe that there is room for rupee to move upto 56.20/USD. Q: What sort of cues are we following today for the rupee because there is no significant weakness in the capital or the equity markets and even the euro, dollar haven’t moved much, it is stagnant at around 1.29. What sort of cues are we tracking today for this significant weakness that we have seen? A: There are two things; rupee market was little bit jittery since it crossed that critical level of 55.20/USD. We have also seen sustained buying interest in the market. In the and last few sessions there was consistent buying interest from the oil counter. That is one counter in which we have seen heavily buying of dollars to meet their demand and oil eased off and that pressure will continue. So, going forward we believe that unless some real inflow starts coming in, rupee will continue to be under pressure.