The rupee has gained close to 2 percent on year-to-date basis this year itself and is currently trading above 61/USD after seven months. Jayesh Mehta, MD and country treasurer, Bank of America spoke to CNBC-TV18 regarding his view on the bond as well as the rupee market.
Mehta does not see the Indian currency falling below 60/USD as foreign investors will continue pouring money in the market until elections which will strengthen the rupee and the Reserve Bank of India might have also planned some strategy to save the currency.
Also Read: Why the rupee may lose steam versus US dollar
Below Jayesh Mehta's interview with Ekta Batra and Reema Tendulkar on CNBC-TV18
Ekta: Where do you see the rupee heading now, further appreciation from the current levels, what is your target?
A: The way flows are coming, looks like further appreciation but we still feel, to pierce 60.25/USD would be a bit difficult because as of now we expect oil companies to finish their oil swaps cover up before March 31 and maybe that is one of the reasons we don't see Reserve Bank of India (RBI) buying and shoring up their reserves, which should happen and they should be doing it. But we will only come to know next week when we see the data. At this juncture, it would have appreciated much more if the oil swaps were not there.
It is not only India but everywhere the flows are going in, particularly, on the carry trades on the fixed income side. We have a bit of flows here but there is momentum on the equities side which comes unhedged and that flows have also been pretty good. If you look between debt and equity, this month itself would be around USD 7 billion plus inflows which has kind of strengthened the rupee.
Also, once it crosses 61/USD you have local exporters, who are not hedged, they are also coming into play. Preparing for other situations and we have elections, so hopefully we might see RBI coming in to shore up some of the reserves. That is why we don't really see it going below 60/USD, but it can happen though at this juncture it doesn’t look like.
Reema: Around 60/USD as an upper limit on the rupee would just be in the near term, up until the end of this month or do you expect 60 to remain the upper limit until elections while there is a lot of euphoria in the equity markets which could translate even into the currency market?
A: That completely depends on the central bank. As of now we are seeing equity flows and that would continue until the election verdict comes in and if the verdict is good, we will see more flows coming in but if the verdict comes negative, we could actually see lot of this money actually go out and that is the time if some buffer has been built in, would definitely help. This is why we are actually looking at 60 being the best situation. But if the RBI has some other strategy in mind, a completely different situation may arise.
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