By DHANYA ANN THOPPIL
BANGALORE – India's Infosys Technologies Ltd. expects the U.S. dollar to trade in a narrow band of 44.00-45.50 rupees short term, its chief financial officer said Monday.
"One point of view is the dollar should strengthen, because globally, every economy is seeing some kind of a challenge," V. Balakrishnan said in an interview.
"The other view is, structurally, that [the U.S.] economy has a bigger problem," he added.
With government debt in the U.S. accounting for about 95% of the value of the economy and the trade deficit mounting, the dollar is likely to weaken, Mr. Balakrishnan said.
The rupee will fluctuate within this band as both these forces play out, he said.
Infosys, the country's second-largest exporter by sales, gets nearly 64% of its revenue from North America and more than 22% from Europe. The fluctuations in exchange rates affect the company when it converts all of its non-dollar revenue into dollars, which is then converted to rupees. Most of the company's expenses are in the Indian currency.
The rupee has been volatile in the last two months, but it is flat compared with levels seen at the end of last year.
The Nasdaq and Mumbai-listed company earns more than 97% of its revenue from outside India. About 70% is billed in U.S. dollars, while 7% each is billed in pounds and the euro. It also earns about 6%-7% in Australian dollars.
Mr. Balakrishnan said the country's central bank should give established companies such as Infosys the flexibility to effectively hedge against currency risks, at par with international competitors.
"Today, there is too much of restriction [on hedging] in India," he said. "We can't even do some complex options [hedging] because they have banned all options," he added.
Mr. Balakrishnan said the regulator should give global companies with good risk management program at least the flexibility to hedge in exotic options instruments.
Write to Dhanya Ann Thoppil at dhanya.thoppil@dowjones.com
