Moses Harding the Executive Vice President & HD Wholesale Banking Group at IndusInd Bank, in an interview on CNBC-TV18 spoke about the rupee and the way forward for different currencies in this space. Below is a verbatim transcript of his interview with CNBC-TV18’s Sonia Shenoy and Anuj Singhal. For the complete interview watch the accompanying video. Q: The rupee has seen a slight bit of strength off late. What kind of trajectory have you mapped out for the rupee and what would the levels be that you are watching out for? A: Actually the rupee weakness for the last one week was mainly on lower forward premium. We had gone into a peculiar situation wherein the cash market is in demand driven mode. You have cash demand against cash supplies which were already hedged. So cash supplies are being delivered on the forward contract and lower premium has cut the supplies in the forward segment. So there is demand driven mode in the cash segment that caused the rupee weakness from Rs 44.40 support level to Rs 45.05 so far. But 45.15 in my view should be the worst scenario for the rupee. I expect rupee to stay in a consolidated mode within Rs 44.65 to Rs 45.15 for the next week or so. Q: Globally we are seeing some dollar buying again. The dollar index itself has been rising. In that scenario, would you say that taking aggressive long positions in favor of Indian rupee may not be advisable at current levels? A: Actually, the dollar weakness against major currencies was driven by interest rate play. The expectation till last week was that the eurozone will move into a rate hike mode while the Fed will continue to stay in pass mode for the next six-12 months. That caused the euro strength against the dollar. But after the recent Greece episode, the interest rate played advantage which the euro had has vanished. The eurozone will also go in a pass mode. The rally that happened on the euro based on interest rate play is getting unwound. The dollar is back at strength, gaining the normalcy and the eurozone weakness will continue to add strength to the dollar. That will also cause rupee to move into Rs 45.15 to 45.25 which I consider is a good level for exporters to hedge their short-term receivables. Q: For the rest of the year 2011, what kind of range are you working with for the rupee both on the downside and the upside? A: Fundamentally, I see the rupee strong into the medium-term through the end of the financial year because offshore supplies will continue to come into India attracted both into the equity and debt segment. So that’s a positive play. Also the interest rate play which gives an attractive forward premium of over 6.5% to 7.25% range that will continue to attract exporters rather than importers. So these two factors are very solid for rupee and I look for probably a 44 to 45.5 as a yearly range and the bias will be outwards 44 and 43.5 in due course. Q: The writing on the wall has been clear now with the more aggressive stance by the RBI. What are you expecting to hear in terms of more rate hikes going forward? A: The RBI has made it clear that inflation is going to be the major risk to growth. So the aggressive rate hike of 50 basis points and possibly another 25 basis points hike in July have positioned the market accordingly. I have seen 10 year yield moving from 780 to 830. The higher interest rate and tight liquidity regime will help inflation a bit but it is going to impact the growth in the medium-term. The RBI’s game is to maintain the growth momentum between 8-8.5% while they work on pushing the inflation below 7%. Get comfy, volatility in oil to stay: Commodity Broking Tags: Moses Harding, IndusInd Bank, rupee, dollar, euro, eurozone, dollar index

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