Any pullback on rupee will be limited to 59/$: Stanchart

The Indian currency is likely to see 62/ USD unless huge foreign funds flow in the country, says Agam Gupta, Standard Chartered Bank.

Rupee hit a life time of 60/USD on Wednesday on the back of huge demand from PSU oil companies and defense companies. "When it broke 60/USD, there was panic and that panic still continues," he told CNBC-TV18 in an interview. Meanwhile, India's March quarter current account deficit was USD 18.1 billion, or 3.6 percent of GDP, lower than expected and below the USD 21.7 billion deficits a year earlier. Market sentiment has turned positive due to Q4 current account data. The data is positive for 10 paise move on rupee, but one should not read too much into it, he adds. "If there is any pullback on the rupee, it will be limited to 59/USD," he said. Also Read: Rupee off record low in early trade, opens at 60.45/$ Below is Agam Gupta’s verbatim interview with CNBC-TV18 Q: What has happened in trade today, any immediate relief that came through either in terms of recovering or because of this trade data that was coming through? A: The sentiment was slightly positive in the morning because of the current account data which was released earlier than expected, also the fact that the Reserve Bank of India (RBI) did announce something yesterday regarding restrictions on how foreign institutional investors (FIIs) could hedge for sub-accounts. Having said this, these two are very minor majors that were only good for 15-20 paise down move from yesterday’s close. We have seen importer demand come in immediately at the dip. We are seeing both oil demand and also other importers buying in the low 60.30/USD. Q: Does the current account deficit number matter so much, this is January to March data and all of us have seen the April and May data as well, do you think the market setting too much store by that? A: It was good for 10 paise downtick. It is historical data. On the margin it is slightly positive, but that is about it. I do not think we can put much store to its effect going forward. Q: What happened yesterday, many explanations have been put to that sharp spike from defense to public sector undertaking (PSU) oil companies? Was that just a one day bunching thing or do you sense from the system that there could be some more pending orders over the next few days? A: Yesterday’s move was primarily driven on account of massive public sector demand. It could be on account of month end demand from either defense or oil. Initially 60/USD was holding and other importers were holding back the dollar demand. When 60/USD broke there was panic and that panic still continues in the market. Any dip towards 60/USD will be used by importers to hedge short-term payables. I do not see exporters doing much. So, when 60/USD broke, there is panic and primarily because corporates started believing that unless you see further Asian currency weakness, 60/USD will hold. However, that didn’t hold true yesterday and hence the short-term panic in the market. Q: What kind of immediate targets do traders see for the rupee on either end, what could it slip to just in the immediate term and where is the relief in terms of a pullback? A: Once 60/USD is broken, the next target is 62/USD. Therefore, in the short-term, it could go to 62/USD. Having said that, if we see some chunky inflows coming in, in the coming days or weeks - there is Hindustan Unilever money that is lined up and potentially could go up to USD 4-5 billion. If that money does materialise, and it comes in then you could see a pullback. Do not expect the pullback to be below 58.5/USD to 59/USD. Those kinds of levels will be lapped up by importers. So, any pullback will be limited to 59/USD and if the supply doesn’t materialise and the short-term bearishness continues, we can go up to 62/USD.