Rupee can cross 59 if Fed upsets, June CAD to shrink: Axis

The home currency is unlikely to breach 59/ USD unless Fed chairman Ben Bernanke's much awaited speech tonight triggers terrible negative sentiment, says Ashok Gautam of Axis Bank.  

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Additionally, Gautam says that India's widening current account deficit is likely to improve June onwards. “We have seen over USD 4 billion debt outflow from May 22 to June 14. June gold imports seem to be coming down; so June onwards, the CAD numbers should improve,” says Gautam in an interview to CNBC-TV18. Below is the edited transcript of Gautam’s interview to CNBC-TV18. Q: All eyes on what Federal Reserve (Fed) and Ben Bernanke has to say. In the run-up to that analysts are saying that rupee is likely to contain itself in this range and not really hit 59. Do you agree?
A: Rupee at 59 against the dollar seems to be toppish at the moment and I would encourage exporters or whoever is holding dollars, to come at these levels and actually supply dollars in the market. Going forward, I believe we will be seeing rupee in a Rs 2 range of 57 to 59 against the dollar.
If the news which comes out of America is not up to the rupee liking and if 59 breaches then we will see quick weakening in the rupee. However, these are the levels where we are seeing good dollar supply. Q: It is likely that the Fed will maintain status quo as of now but we cannot really predict what Ben Bernanke will say but if it is status quo do you see rupee remaining within this range or do you see a Rs 2 movement either ways?
A: If Bernanke is going to say that they will continue with the Quantitative Easing (QE) for sometime, that will be a sign for the risk on and we will see some kind of supply coming in. Rupee will then gain. However, if there comes a definite timetable that by a particular month so much amount of reduction will take place, then rupee will have to brace for another round of weakness. Q: When do you see stability returning to the rupee atleast in the medium-term, can you give us a time range or do you see the rupee settling at any one level over the medium term?
A: Rupee has actually been responding to whatever is happening on international scenario. We have seen over USD 4 billion debt outflow from May 22 to June 14. June gold imports seem to be coming down so June onwards, the CAD numbers should improve. So, if we look at both these scenarios, one is positive and another is negative. However if we are able to control CAD numbers and India continues to remain a good investment destination come what may in the international market, then rupee going forward should gain.