What do you make of the resilience of the rupee? We are hitting a new low but at 78-78.50, it is much better off than earlier instances where we saw capitulation?
It looks like 80 is coming but I don’t know whether in a week or two or months. There is a continuing market crisis in the US. If you look at outflows, from April, there have been only days when there were inflows. So basically, it is time for FIIs to put money back home and the rupee is going to feel the pressure. The domestic investors have been protected so far and of course the Reserve Bank is there. They do not want rupee to go to hell in a basket and so they are trying to protect it. But they also have limitations. Reserves have fallen below $600 billion. They have been in the forward market etc. I think when it is going down, it will go down. Today it opened at 78.30 and it is at 78.70 right now.
When it comes to the currency markets, given the weakness that we see, RBI is said to be intervening in spot futures FX markets and that is quite understandable given that the move in the rupee was rather big. It opened around 78.30 levels and it has moved on to 78.70. Do you expect RBI to intervene in a major way and where do you see it settling?
I do not know, and nobody knows. RBI is of course in the market, I mean, it is their job, they must prevent things from getting too crazy, but this is one of the biggest intraday moves in a long time, so the market is on fire. One of the things to pay attention to and I think that markets move and then they bounce back. We will see some volatility but I do not think it is going to go straight down.
But we need to recognise that the global sentiment is to see US interest rates going up because the inflation is high. Global sentiment is in favour of a stronger dollar. However, having said that equity markets are tanking and at some point that will start to control and the dollar will weaken.
I do not know when that is, at that point I think maybe the rupee would have crossed 80. Chances are it would have. But it is not going to keep falling. Nothing keeps going in one direction. The only concern is, if you compare what is happening now with the 2008 crisis, the market fell for a year and a half. Right now, it has been falling for about six months, so it is a very difficult time.
At the best of times, it is impossible to forecast the market, But volatility is so high you should not even try. I know it is your job to tell people what is going to happen, but you do not know, and I do not know, and they do not know.