Rupee fall against dollar: Rupee may fall to 85 against dollar leading to RBI intervention: Naveen Mathur – haroonabadvital.com
Naveen MathurDirector – Commodities, Currencies and International Business, Anand Rathi WealthThe general perception is that the rupee may continue to 85 levels or so where the RBI may start intervening, he says. Perhaps they will intervene because we saw that the dollar reserves at the Reserve Bank of India at the end of September amounted to about $705 billion, and they now stand at about $657 billion. The overall outlook is a bit negative for the rupee, considering the geopolitical scenario, global economy and other things.
What are you thinking about in terms of currency? Will the pressure on the rupee continue due to the strength of the dollar?
Naveen Mathur:What we’ve seen over the past couple of days has been largely because of the dollar. After the US elections, President-elect Donald Trump announced some policy measures that would be positive for the dollar index and thus the dollar price rose significantly. On the downside, we have seen in the last few months around 104 levels or so until touching beyond 107. Currently it is around 106.47. This is one of the major influences pushing the rupee lower against the dollar.
The rupee hit an all-time low yesterday at around 84.70 and the spot rate today is trading at around 84.74 or so. Now, the second aspect relates to specific GDP numbers. The GDP numbers that emerged for the second quarter, which is the July-September quarter of this year, were well below expectations, 5.4% as far as the realistic numbers are concerned, which the government announced last week. This affects the good situation of the Indian part of the story.
FIIs have been quite aggressive in buying over the past year or two for India. India still looks very positive, but in terms of the global economy and geopolitical scenario, question marks have arisen due to those impacts on India. We also see the Chinese Yuan depreciating by 7.31 against the US Dollar. I think levels 7.33 and 7.34 are very strong levels that the Chinese Yuan should test.
The general perception is that the rupee may continue at 85 levels or so as the RBI may start intervening. Perhaps they will intervene because we saw that the dollar reserves at the Reserve Bank of India at the end of September amounted to about $705 billion, and they now stand at about $657 billion. The overall outlook is a bit negative for the rupee, considering the geopolitical scenario, global economy and other things.
The India story still holds and we feel the rupee will range between 84.50 to 84.75. The RBI does not want the rupee to cross 84.75 or so. The BRICS news affected the rupee yesterday. We have witnessed a devaluation of 21 paise in one day. All these factors are currently affecting the rupee against the dollar.Given the weakness in the currency and the prolonged correction therein, do you sense RBI intervention any time soon?
Naveen Mathur:It’s always a guessing game. But with regard to foreign exchange reserves, they decreased from $705 billion where they were at the end of September. We are currently at about $657 billion. The Reserve Bank of India intervenes in markets, but it does not intervene aggressively to keep the rupee from falling. We also have to understand that export competitiveness depends on the depreciation of the rupee against the dollar. If the rupee depreciates, it helps exports, helps current account numbers and other things. But a major devaluation will not be in the country’s interest because we are importers of crude oil and other energy products. So, it will be a wait and watch. But as it seems, there was intervention, but not strong intervention by the Reserve Bank of India.
