Rupee won't breach 60.25/$; see no RBI intervention: DBS

Rupee retested the psychological 60/USD mark in early trade on Wednesday. Arvind Narayanan of DBS Bank doesn't see it weaken significantly from current levels. He expects the Indian currency to hold 60.20-60.25/USD for now.  

Strengthening of US dollar has led to this decline in the currency, he told CNBC-TV18 in an interview. Further, he ruled out the possibility of any Reserve Bank of India (RBI) intervention to support the currency. "The natural flow of the market will ensure that the rupee does not fall significantly." Also read: RBI issues draft guidelines to hike provns on unhedged cos Below is the edited transcript of his interview to CNBC-TV18. Q: What is causing so much pressure? Are you hearing of sharp outflows again and from which market? Is it a bond problem or equities? The expectation was that there would be some bunched up inflows that could support the currency? A: Even I feel some bunched up inflows are expected. So rupee should not weaken significantly from here. But I think this is purely a reaction to what the US dollar is doing in other markets overseas. The dollar-yen is about 100.70. Euro is below 1.30. So USD-INR is just responding to the strong dollar move overseas. It is broadly in line with the medium term trend that USD will strengthen against most currencies. Q: Because it is a global currency issue that the rupee is reacting to, will the Reserve Bank of India (RBI) not step in? Given the fact that we have already seen a drop in the forex reserves the RBI cannot afford to step in too much at this point in time? A: That is right. I don't think they are too worried about this move as the rupee did get a good pullback to about 58.95 or so. Since then, whatever move has happened, it has been primarily driven by fundamentals and underlying reasons. Today’s move broadly reflects the overall global sentiment and the global dollar move. So, I don't expect RBI to come in. The natural flows in the market would ensure that rupee does not weaken significantly from here. I would think 60.20-60.25 should be the cap for today.