RBI inaction pushed rupee to 60; can hit 62 now: HDFC Bank

Ashutosh Raina of HDFC Bank says the Reserve Bank of India's failure in intervening and rescuing the Indian currency on Wednesday led to rupee’s fall to 60.7 against the dollar.

Additionally, Raina says it is difficult to define a trading range for the rupee after it crossed the support level of 60 against the dollar on Wednesday. He says a level of 61-62 against the greenback is likely now.

Also read: Rupee likely to touch 62 against dollar soon: Moses Harding
Raina says it is incorrect to draw a parallel between the Indian currency and other emerging market (EM) currencies as the rupee is a currency with a wide current account deficit (CAD) which is not the case with other EMs. 
"The rupee is a bit weaker compared to EM currencies. It can see some recovery from yesterday’s lows but again the inherent weakness is there," adds Raina in an interview to CNBC-TV18. Below is the edited transcript of Raina’s interview to CNBC-TV18. Q: What did you see in the dealing rooms yesterday and what are you expecting to see on the rupee this morning?
A: Wednesday was a very ferocious call. On the back of stop losses triggered for the banks, the banks were running short dollar positions. We were expecting some intervention at 60/USD level by the Reserve Bank of India (RBI) as they have been doing for last so many days but yesterday, the fall was ferocious because RBI was not intervening at 60/USD level.

Q: The fall from levels of 60/USD to 60.7/USD came on the back of very few trades, it wasn’t that there was a lot of trades, so do you think that the market would now going forward be increasingly more nervous given that the RBI didn’t intervene at 60/USD?
A: Yes, obviously. What happens in INR is that it is not that only the outflows matter for INR. We are current account deficit (CAD) currency and slowdown in inflows also has a very great impact on our currency. Hence, the fall becomes very sharp. Same way yesterday, in spite of very few trades the stop losses trigger just make the fall very fast and very sharp. Q: What are you expecting to see in trade today, what could be the levels to watch for and did you notice similar trend across all emerging market (EM) currencies or was the rupee the weakest in trade yesterday?
A: If we compare it with EM currencies, ours is a CAD currency whereas most of the EM currencies are current account surplus currencies. So, we cannot equate them with EM currencies. Hence, the rupee is a bit weaker compared to EM currencies. It can see some recovery from yesterday’s lows but again the inherent weakness is there. So, we cannot see too much of a sharp correction going ahead even today. Q: What could be a support for the rupee from these levels?
A: At the moment 60/USD is the next support level. Now, we are in an uncharted territory so we can go to 61-62/USD levels so you cannot define that range for downside from here.