Fiscal concerns have investors avoiding rupee: BNP Paribas

Growing concerns over India’s fiscal position and a growing current account deficit is leaving the rupee vulnerable, says Chin Loo, senior currency strategist at BNP Paribas. She sees the rupee probably remaining under pressure more than it will benefit from the risk aversion global environment.

Below is an edited transcript of her interview to CNBC-TV18. Watch the accompanying video for more. Q: What is the sense you are getting now that 52 has been broken? Is the rupee among the worst performers in the Asian basket, therefore, the reasons are more domestic than just global?
A: Yes, I think so. In terms of the fundamental drivers for a weaker rupee it is clearly because investors are quite worried about the fiscal position and the current account deficit as well with capital inflows quite hard to come by nowadays. So it is certainly causing investors to shy clear off the rupee in the short-term. Q: Do you think that it grinds slowly lower or do you think that after it crosses some level you could see an accelerated fall?
A: At this point of time it’s quite difficult to say the way in which investors will get out of risk currencies until we know for certain how things go on the European front. There still isn’t much clarity until elections in France and how things are shaping up in Greece in May. Until then we might continue to see some risk hover which means that the Indian rupee will probably stay under pressure more than it will benefit from the risk aversion environment. Q: According to you what currency are we tracking the most within the Asian basket possibly?
A: From the currencies we are tracking, I think there is some good news probably to be expected from Indonesia where we are looking at potential credit upgrades still in Philippines that will be forthcoming. The rest which have done quite well is the Singapore dollar after a further tightening of its monetary policy. Southeast Asian currencies have done comparatively better this year as compared to North Asian currencies. Also Read: Re to decline more if investment cycle falls more: JPMorgan Dollar-Re uptrend to continue; may retest 54 mark: IndusInd