Reduce CAD to ease rupee: Deutsche Bank

Sameer Goel, head of Asia Rates & Currency Research, Deutsche Bank, says that if foreign currency denominated bonds as offered the way it was offered in the past then they could prove to be effective in bringing more dollars into the system. It will also depend upon how well they are marketed.

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: Do you think given the weak appetite at this point sovereign-backed bonds to NRI issuances if they are done would see a good enough response? A: The appetite in terms of exposure to INR access has been quite weak but we must realise that past chunk of what is happening to the currency is because of current account and not out of capital account. If foreign currency denominated bonds as offered the way it was offered in the past then they could prove to be effective in bringing more dollars into the system. It will also depend upon how well they are marketed. Q: Is 56.28 for the moment you think or is this just a one way street still? A: We are seeing a disproportionate reaction as the market has become more illiquid. The markets are not convinced with the actions of authorities taken up until now. It is very tough to say whether 56.20 would necessarily be it. For now, the base of this move is such that, you are bound to see some breathers and some reversals at different point in time. Unless some concrete steps are taken, I don’t mean regulatory peaks which we have seen up until now. The basic deficit on the current account will still continue to put pressure on the rupee. Q: There is a correlation between euro and rupee. Do you expect euro to fall further? A: For everybody who argues that euro is the main reason for the rupee to be under trouble in India. One need to check the euro INR charts and realise that is close to peaking out its all time highs as well. Events in global macro space and euro are indeed making it even tougher not only for India but for most current account deficit countries in the emerging market space. But, India has issues and problems of its own which preceded the world worrying about European situation. Though the euro has exaggerated the problem but it can’t be blamed all on the euro, the problem of gap in the current account and how that impacted sentiment in India was happening even before the European issues started to take shape. Also Read: Will rupee retire at 60/$? Experts debate Nifty's next move