Both the government and RBI will have to take steps in tandem to ensure that the dollar supply increases in the country. If the rupee breaches 60.20/USD then it opens the room upto 62/USD says Gautam.
Also read: FII flows to return if RBI cuts rate; INR may touch 62: BoA
Below is the verbatim transcript of his interview on CNBC-TY18
Q: We are getting some dealer checks as to the fact that the Reserve Bank of India (RBI) is aggressively selling dollars now, but what are you hearing in terms of the RBI intervention and the levels that you are seeing on the screen?
A: In the market we have been seeing some kind of supply around 59.90 upto 59.98, but the moment that supply was drying up, the continuous dollar demand was pushing the dollar-rupee rate high and that is what was evident when 60 mark got breached. Now rupee is totally into a uncharted territory.
Q: What do you think is the way forward now? RBI has been unsuccessful in protecting the 60 mark and you said that it might just be a free-fall. What are the levels that dealers are now talking about on the downside? What will be the sustainable level for the rupee?
A: At this point of time your guess is as good as mine because we had earlier believed that 60-mark would be protected, but today that level has been breached. After that we were seeing 60.20 and if that goes then it opens a room upto 62.
However, I am quite sure that at these levels some steps will be taken so that dollar supply is ensured in the market and this kind of pressure on the rupee is abated.
Q: Given the limited forex reserves, how long do you think the RBI will be able to support the currency like this? Are you expecting to see any kind of long-term administrative measures that the RBI will take now?
A: Both the government and RBI will have to take steps in tandem to ensure that the dollar supply increases in the country.
There are various measures, which can be taken and which are being discussed. 60 was a very psychological level, so we will have to ensure that dollar supply is there.
Actually, the dollar supply is coming but somebody is actually saying that they are going to defend INR at these levels because if this does not happen then I am a little bit afraid that this weakness will see rupee moving to further weakness.
Q: Our currency is moving completely differently from what the emerging market (EM) currencies are doing today. What is the domestic dollar-rupee factor that we are working with, which has not been seen globally today?
A: From our country we have been seeing the debt outflow for a long time, since May 22 and if on that equity outflow is also added, which we have been hearing then certainly it is putting tremendous pressure on the rupee.
Therefore, we have to have some kind of matching flows because this is the free market and unless supply is met by the demand there would be disequilibrium. Right now demand is there but supply is not there, which is continuously putting pressure on the rupee.
Q: What are the couple of steps in terms of a scenario like this that dealers or maybe currency analysts would be watching out for from the RBI?
A: RBI had taken lot of step and some of those were eased. We do not know whether some of those steps will be taken again by the RBI to put some kind of clamps on the market. But I hope that does not happen.
Essentially there are various administrative steps, which are taken by the government to ensure that the investment climate improves in the country and people consider India as a good destination for their dollar or foreign exchange to come in.
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