In an interview to CNBC-TV18, Claudio Piron, Head of Emerging Asia Foreign Exchange and Fixed Income Strategy at Bank of America said rupee is his favourite global currency right now. "Our forecast in terms of the next couple of months is 57/50 on USD-INR," he said.
In an interview to CNBC-TV18, Claudio Piron, Head of Emerging Asia Foreign Exchange and Fixed Income Strategy at Bank of America said rupee is his favourite global currency right now. "Our forecast in terms of the next couple of months is 57/50 on USD-INR," he said.
Below is the transcript of Piron's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18
Latha: Which of the high yielding currencies are getting a look in? Which currency do you think is worth betting on the Asian space and your view on the rupee as well?
A: Our favourite currency is the Indian rupee. Our forecast in terms of the next couple of months is 57/50 on USD-INR. Having spoken to a lot of clients both in Singapore and in London there is still a constructive mood towards the Indian rupee. It is widely recognised that the Reserve Bank of India (RBI) will accumulate reserves and that will slow the ascent of the Indian rupee, but again, clearly carries on. There was a little bit nervousness ahead of last week's European Central Bank (ECB) and non-farm payrolls but we have successfully navigated that and we are all good to go.
Sonia: Overnight we have seen the euro hit four month lows because of the widening gaps between the Europe bonds and its spheres; do you expect further lower levels?
A: We do expect euro-dollar to continue to move lower to 1.30 to 1.33 levels in particular our verdict on the European Central Bank meeting last week was that it was dovish in the sense that it switched to no longer sterilising Securities Market Programme (SMP) and in addition to that indicated an expansion of 400 billion euros potentially in terms of targeted long-term recoopearation. Again I think that favours downside to euro-dollar and we are witnessing this as we speak.
Latha: If you could take us through how you see the dollar index moving and the ten year yields in the US; it has been pretty confusing the yields picture in particular but first the dollar index?
A: It is a difficult market in terms of dollar index to a certain extent we have seen some basing and improvement in the dollar index, clearly the downside on euro-dollar is helping but the uplift on dollar-yen hasn't been so prevalent. What I am saying here is we have got quite unsynchronised effects markets to a certain extent and clearly when you look a further field in emerging markets, emerging markets currently has been doing well. We are seeing upside to the dollar but not a dynamic or explosive upside. We are seeing a grind and that seems to be transmitted predominantly through euro-dollar. That brings us to your next point which was about US yields and to a certain extent we are in the camp that we feel that US ten year treasury yields will go to three and half percent next year that looks like a blong shot but nonetheless we feel that US economic recovery will play through, but the issue that you have is an intrench belief amongst many investors in the world that we are on a secular stagnation for developed markets and that may be holding back the strength in the dollar and the uplift of US treasury yields.
Sonia: What about the year end target if you have any for the Indian rupee. Would you expect a significant amount of appreciation from current levels?
A: We are looking for as mentioned 57/50 for the next couple of months but we would expect by the end of the year to get back to 60/61 levels and the reason for that really is when you look at the medium term outlook India is still running a higher inflation rate relative to peers, we still have a current account deficit relative to peers and clearly the 57 clearly will be an equilibrium point for the Indian rupee and so it will be hard to go below 57 particularly as well beyond the fair value fundamentals Reserve Bank of India (RBI) will be reluctant to seek move beyond there. So short-term strength, longer term, medium term weakness but nothing to be concerned about.
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