Rupee unlikely to weaken significantly from current levels

Experts see RBI intervening to arrest extreme fall

The street does not see the rupee weakening significantly from current levels and are of the view that the Reserve Bank of India (RBI) will intervene as and when required to arrest extreme fall.

“The rupee may strengthen in the short-term till the state elections if commodity prices continue to remain depressed. However, in the next 2-3 months I do not see the rupee strengthening beyond Rs 52.50-53.00 and on the topside I do not see it breaching the Rs 56 mark. The probability of the rupee breaching Rs 60 is low in 2013,” said Brijen Puri, executive director & head of markets, JP Morgan.

At 2:00 PM, the rupee was trading at Rs 54.37 against the dollar compared with previous close of Rs 54.63.

According to J Moses Harding, head - ALCO and economic and market research, IndusInd Bank, the trading range for the rupee against dollar for the rest of 2013 is at Rs 53-55 and this is good to balance export competitiveness and inflationary impact.

“Given the sharp reversal in commodity prices and its positive impact on inflation and current account deficit, RBI would prefer stability at higher end at Rs 54-55 and absorb excessive gains below Rs 54 with twin objective to build dollar reserves and provide rupees into the system, as alternate to cash reserve ratio cut and/or open market operations bond purchases,” said Harding.

The RBI has always assured that it will intervene in the forex market in case of extreme volatility of the rupee.

“The weakening of the rupee in 2013 will be limited to Rs 57.50 in 2013 and if it breaches this level the RBI will intervene,” said Abheek Barua, chief economist, HDFC Bank.