Re to underperform compared to Asian peers: StanChart

Agam Gupta of Standard Chartered Bank, says that he thinks that an extra demand for dollar due to trade deficit will continue to drive the rupee market. He also expects the euro-rupee can move higher and in a new range. 

Below is the edited transcript of his interview to CNBC-TV18. Q: Is the rupee an underperforming currency vis-à-vis Asians currencies?
A: The rupee has been underperforming from last 3-4 days. The rupee is basically being driven by some extra demand which is present in the market. So, the rupee continues to be a bit weak than expectations. Q: Is this extra demand for dollar temporary? Will it stop in sometime and then continue to follow the global riskier currencies because we have seen the euro at more than 1.32 and the rupee has weakened? Is this phenomenon just temporary with respect to extra demand for dollar?
A: No. I think looking at the trade deficit for the last couple of months, that kind of little bit extra demand will continue to drive the rupee market. We are looking at the euro-INR going into a new level right now, because we do expect that with a lot of the European problems having been addressed, the euro-INR can move higher from here. Earlier it has been holding 72 as its high, but now it has gone through that. So the euro-rupee can go into a new range. The rupee will continue to be a bit of an underperformer if you look at it in comparison with other emerging market currencies. Q: What is the range you are looking at for Q4?
A: We do expect a risk-on sentiment to continue. However, the rupee should continue to remain in this 54-55.50/ USD kind of range for the coming month or so. Q: Have you penciled in any kind of a longer-term view on the rupee considering the fact that this is going to be one-year prior to the election and the Budget could perhaps inch higher on the fiscal deficit side?
A: If we do not get any bad news from the local factors, like the rating agencies, we do expect the rupee to stabilise at these levels in the coming months. We expect it to continue to be in a range of broadly 53.50 to 55.50/ USD in the next two-three months. Q: How do you think the bond markets are likely to pan out up until January 27, 2013? Do you think we could see the 8-8.1 range coming in?
A: Currently, in the next week or two weeks, we should not breakout of the 8.1 to 8.2 range. I think we would only rally below 8.1 coming closer to the monetary policy. So, maybe in the middle of January, if we do get a benign inflation print, I think we will then go and trade between 8 and 8.1.