Weak US jobs data may keep rupee at 57/$ for now: StanChart

High gold imports and foreign institutional investors (FIIs) outflows from debt segment have added to the rupee woes. On the global front, nervousness about US Federal Reserve closing the tap on QE sooner than expected is adding to the pain, says Agam Gupta of Standard Chartered to CNBC-TV18.

In the near-term global factors will drive rupee’s movement, it may fall further if non farm payroll (NFP) data is strong. The US non-farm payroll data for May will be released today. It is seen improving to 167000 from 165000 in April. The unemployment rate is however seen unchanged at 7.5 percent after it slipped from March levels of 7.6 percent last month. The short-term high for rupee could be 57/USD if the NFP data is lower than expectations and the rupee may settle at 56/USD by June end. The Indian rupee continues to remain under pressure; it touched the 57/USD on Thursday. Currency experts see the rupee breaching 57/USD soon on strong dollar. Also Read: Re weakness to continue unless RBI intervenes, says Rajwade Below is the edited transcript of his interview to CNBC-TV18. Q: How much of this is an immediate problem for the debt outflows? What kind of targets for the rupee are people talking about on the downside? A: The immediate bearishness on the rupee is due to gold imports remaining high. There have been outflows from the debt foreign institutional investors (FII) segment. It is very important to see what is going to happen after the non farm payrolls (NFP) data today (US employment data). The underlying bearishness on the currency is on the expectation that the Fed might taper earlier than expected. That will probably go either way after the NFP data. If one sees US treasury yields going above 220, and a strong NFP data, then there will be further bearishness on the currency. Otherwise, we have seen the highs for this kind of short-term move. Q: Give us an expected range on the rupee in the near-term, medium-term and for the next three to six months. What would your target be on the upside and downside? A: In the near-term it is going to be driven by activities in the global market which is very important. If the US yield breaks above 220, then one can see the rupee touching 57.50/USD or 58/USD. But that will be short lived. There are inflows that will come in by the June-end. One might see a spike in case NFP data is very strong. If it is lower than expected, then the short-term high of 57/USD levels that was traded yesterday could be seen. It could probably move backwards to 56/USD by the end of the month. _PAGEBREAK_ Q: What will be the Reserve Bank of India’s (RBI) response to the comments of Montek Singh Ahluwalia and others stating that “propping up the rupee artificially is not the right thing to do”? What is the best outcome for the RBI? How do you see them carry out? A: The RBI is focusing on two things. One, they do not like extreme volatility and choppiness in the market. But that is just a refection of happenings across the world now. They will try to control the volatility. They have always not protected the target level. That will be their continued policy. The most important thing that they are concerned about is the high gold imports. RBI will continue to move towards putting in measures which is going to reduce the huge gold imports that we have seen in the month of April and May. That is going to be their most important objective for the short-term. Q: Anecdotally, did you hear of any intervention or buying by the RBI that probably pulled the rupee back from that 57 mark? A: Yes, in the morning when we traded at 57/USD, there were some offers from some banks. They generally sell on behalf of the RBI. Anecdotally, I think they were selling dollar at 57/USD yesterday.