See rupee at around 64.50 against USD by year-end: Barclays

The Indian rupee has opened lower on Tuesday after a long weekend. The currency fell to 63.54 per dollar, down 12 basis points compared to 63.42 a dollar on Thursday. Mitul Kotecha of Barclays expects rupee to be rangebound with a slight weakness but does not see dramatic decline in the currency.

He sees rupee trading at around 64.50 as against USD by the year-end and thinks it wouldn’t be surprising if the euro moves back to 1.05 against dollar in near-term.

Below is the transcript of Mitul Kotecha’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Is the rupee positioned for a little more weakness or is 63.80 per dollar what it saw the worst? A: The pressure at the moment on the rupee is come from number of factors. What we have seen is a lot of investors certainly while look at fast money investors who have been very long rupee in the first quarter have been taking money off the table and generally addressing some of the carry trades which the Indian rupee was obviously one of the favourite trade and therefore we have seen a bit of weakness. At the same time there has been a little bit of more concern about issues such as the minimum alternate tax (MAT) the tax as well as the land acquisition bill and some of the reform measures and this is also a little bit more negative sentiment. At the same time oil prices have been rising as well. To answer your question we may see some more near term pressure in the next few weeks over. We don’t expect to see a dramatic decline in the rupee. It is worth noting that when you look at the real exchange rate of the rupee, Real effective rate it is declining quite sharply so the rupee is become more competitive in recent days and weeks.

Latha: So 64 per dollar we see at all?A: It seems unlikely in the near term; we retain our forecast for the end of this year or for Q3 which is 64.5 per dollar. We do expect a gradual depreciation.Sonia: What is your own forecast of how the dollar index may pan out from here? It has been couple of days of gains for the dollar index, currently at around 96 where do you see it head?A: We see resuming gains; our forecast clearly euro is the biggest component of the dollar index and we expect the euro-dollar to decline again by the end of this year. The recent rise in euro in our view is providing better levels for sell the currency. We could see euro-dollar move back to about 98 which could by end year which would imply much firmer dollar index in the coming months. Latha: Parity, by end of year what would be a near term view say a one month view or a one quarter view. Does it head back even to that 1.05 within a month or a quarter?A: The move is been so rapid and so sharp in the recent week so I would not be surprised to say a move back towards 105. However, this is shook a lot of investors and there is a lot of issues still such as Greece etc. At the same time the quantitative easing (QE) from the European Central Bank (ECB) is remaining very aggressive. On that basis ECB still wants to drive the currency lower so yes, it is very possible that we would see a move back towards 105 in the next several weeks. Latha: What is the rupee range? Does 63 per dollar about the strongest the rupee gets?A: I find it difficult to see the rupee appreciating from here. Not so much because of any particular negative domestic factors. The reality is there is a willingness to keep rupee competitive. On that basis any sustainable move now below dollar –rupee 63 looks unlikely.