Rupee to remain under downward pressure: AV Rajwade

AV Rajwade, forex and treasury risk management consultant, AV Rajwade & Co believes the Indian currency is likely to see downward pressure today. In an interview to CNBC-TV18, he adds that the currency is likely to follow its recent pattern of remaining under pressure and may strengthen towards the end of the day.

The rupee hit a new low of 63.15 against the dollar on Monday, its worst fall since 18 years.

Below is the edited transcript of Rajwade's interview to CNBC-TV18.

Q: What happened yesterday in the last half an hour or so. We saw a near vertical fall for the rupee to touch more than 63/USD. Is there no supply that is coming in of dollars now? What is going on in the market?

A: I am sure there is some supply but it is for short of the demand. The key problem is when there is a gap between demand and supply, at the margin the price movement can be very large. It is disproportionate to the kind of gap between demand and supply that exists.

This pressure has been there for quite sometime and I do not see the current policies affecting that pressure. We can continue to see some pressure. The only thing that stands between the rupee and a further fall is the Reserve Bank of India (RBI) selling dollars from its reserves. Given the quality of reserves, I doubt whether they would be in a mood to do any intervention on significant basis. So, I would expect the downward pressure to remain so long as the present situation continues.

Q: Yesterday’s fall came on lower volumes, so what is the worst case scenario atleast for today because yesterday was 63/USD and no one thought coming the last 15 minutes played its role. Today what is the worst case scenario? Is 64/USD coming on those lower volumes?

A: One thing I have learned after 50 years in financial market is not to predict levels and certainly not levels and timing together because one is more likely to be proved wrong rather than right. I prefer a five year forecast because by then people have forgotten what you said.

But now day-to-day it is difficult, downward pressure will continue. The pattern which we are seeing is also likely to continue, the downward pressure for much of the day, some strengthening towards the end of the day. This is what we have been seeing for the last many days, many several weeks now and that pattern may continue.