See further rupee weakness; can't bet on RBI's aid: HDFC Bk

Ashutosh Raina of HDFC Bank sees the Indian currency opening at 61 against the dollar today. In an interview to CNBC-TV18, Raina adds that fears of US Fed tapering off quantitative easing (QE3) earlier on strong jobs data will put pressure on all currencies against the dollar.

Raina adds that one can’t be too sure of the central bank stepping in to rescue to rupee. "When there are exaggerated moves, the central bank usually steps in. So, we will have to keep our fingers crossed today because today we can see fairly good amount of depreciation happening in the rupee," he says.

Below is the edited transcript of Raina's interview to CNBC-TV18. Q: We are seeing an across the board selloff in global currencies versus the dollar because of the strength in the dollar index, what are you expecting on the rupee today? A: The non-farm payroll numbers that came on Friday were pretty decent as compared to the expectations and now we suspect anticipation of prediction in Quantitative Easing (QE3) as well as uncertainty over the exact quantum and sequence it follows could ensure that a rally in greenback remains intact over the next couple of months. So, we can see tapering starting as soon as September this year which can put all currencies against the dollar under pressure. Q: How much further weakness do you anticipate on the rupee and what are the levels you fear the rupee could touch at the lowest? A: I suspect that in the opening itself, today we may touch a crucial 61 level and then we have to see if there is any intervention from the central bank. We can see some more weakness for the rupee going ahead in the days to come.

Q: Do you think the central bank will step in this time because the forex reserves are not too high and like the central bank has been mentioning several times in the past if there is a global rout then there is no need for the central bank to step in. Do you expect to see any kind of intervention today? A: We have seen some intervention happening when there are big moves. When there are exaggerated moves, the central bank usually steps in. So, we will have to keep our fingers crossed today because today we can see fairly good amount of depreciation happening in the rupee. Q: The central bank has maintained that they will step in just to curb the volatility and not really to maintain any level but at levels of 61 or beyond do you think there could be a case perhaps for the central bank to look at direct funding of crude purchases, floating NRI bond, etc. Due you think that is something that has been talked about? A: I think of late a lot of talk has been emanating about that direct purchase from RBI by the oil companies but I don't know how much they can fund it out of their reserves. Maybe a part of it can be funded by them directly from RBI but a majority of it has to come to the market only.