Dollar to gain if risk sentiment worsens: Deutsche Bank

The rupee touched its all-time low of 54.36 on Wednesday and reached 54.34 this afternoon. However, finance ministry sources seemed to be hardly concerned with the fall in the rupee.

A comment from Delhi said that it's not possible for Government of India to react selectively and continuously. It also went on to say that fiscal measures to stem the INR slide are not being considered at this point. This basically means that now, it is completely upto the Reserve Bank of India to take steps for addressing what is essentially a fiscal problem that needs to be taken on board. In an interview with CNBC-TV18, Sameer Goel of Deutsche Bank talks about what is happening with currencies in different parts of the world. It is not only the rupee that is under pressure, various other Asian currencies along with the euro have been weak. Goel said that the global markets have reacted to the political situation in Greece and it is going to be harder for the markets to gain a lot of confidence in the euro at this point. He is of the view that the dollar is going to be a big beneficiary, if indeed the risk sentiment continues to worsen. Goel also blames outflows in the equity markets in Asia, over the last few days, for the weakness of the rupee and other Asian currencies. Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: What are you calling in terms of euro-dollar level and do you expect to see a big crunch down on the euro from here? A: We are certainly looking at more weakness to come in the euro. The global situation has got a lot more complicated in the last few days. The markets are actively speculating on whether the political situation in Greece will eventually lead to unwinding of a lot of arrangements and settlements which had been done earlier and which had led the market to believe that the European situation could stabilise. I think this brings us into a territory where it has become a lot less clear as to how the European situation will evolve. But, certainly, over the next few days particularly given the political calendar there, it is going to make it harder for the markets to gain too much confidence in euro at this point in time. Q: Conversely, what kind of levels do you think the dollar index could get to because that has an impact on emerging market equities? A: It is hard to say. At the moment we have clearly moved into a territory where from just worrying about the possibility of any signs of recovery in the global economy being softer than expected. Over the last few weeks, the markets have been concerned that potentially the pick up in economic activity in the US, for example, those mostly related to weather and maybe the activities, the indicators are not quite as strong. From there the concerns have moved over sort of in a similar sense as it was in the summer of last year. We are now leading to more global macro developments, specifically related to political economy, especially related to what is happening in Greece. That makes it much harder to then talk about what levels. Clearly dollar is going to be a big beneficiary, if indeed the risk sentiment continues to worsen. Q: Today has been a nasty day for Asian currencies. The rupee is at an all time low but many others are as well. What are you hearing on the trading desk in terms of whether there have been very sharp outflows of these key Asian markets and that has led to the kind of weakness we have seen? A: Certainly, if you look at and track the flow data on equities and the equity markets in the region over the last few days, there have been outflows. In fact year-to-date there has been markets where a large chunk of the money has gone into net outflow positions from net inflows. There is pressure of flows on the region. But a large chunk of it, for now, is primarily focused in the equity markets than the debt markets. Debt markets are harder to track and the numbers come with lot lesser frequency. So that is something we would only find out in due course of time.