Re weakness to continue unless RBI intervenes: Rajwade

AV Rajwade of AV Rajwade & Co believes that unless the Reserve Bank of India (RBI) intervenes by selling dollars, the weakness in the rupee will continue.

Yesterday the Indian rupee breached the 57 mark against the dollar and hit one-year low but towards the end of trade it managed to recover to close at 56.8 mark. However, he says the fall in the rupee is good because it makes the Indian companies better in competition with imports as well as in export market. Commenting on the gold import duty hike, he said it will do nothing to improve the demand-supply situation but in fact it "we make it too costly in the official market, the smuggling route will open up along with hawala market." Below is the transcript of his interview on CNBC-TV18 Q: Are we likely to see more weakness in the rupee in the near term and perhaps even a breach that all time low of 57.32/USD? A: That wouldn’t surprise me. The only thing that will keep the downward pressure on the rupee under check is if Reserve Bank of India (RBI) intervenes by selling dollars, but there is no sign of it so far. Therefore, so long the RBI remains on the sidelines, my expectation would be that rupee would remain under pressure and we could see further weakness. Also read: Rupee manages to recover from 1-yr low, worries remain Yesterday, one of the developments was the increase in import duty on gold. I do not believe it will do anything to improve the demand-supply situation apart from the cultural aspects of gold purchases. However, the fact is that if you make it too costly in the official market, the smuggling route will open up once again along the hawala market. So, I think these are futile steps. For the tradable sector, the fall of the rupee is good. I think it makes Indian companies better in competition with imports as well as in the export market. So, there are positive things with the rupee fall.