Media: Lets start with Indian rupee because that has seen a bit of appreciation today. Do you see that continuing?
K N Dey : Well, 44.25 looks to be a strong support. I feel once it breaks 44.25, mainly 43.80 and then to 43.50 but before that, we will see a lot of speed breakers coming in. It could again go back to 44.50/60 because of the month-end pressure.
Media: The rupee actually has been a very tight range between 44.20 to 44.60 in the recent days. Do you see that range continue for the rest of this week also?
K N Dey: I do believe the range should be between 44.00 and 44.50 because there are a couple of things. The first is that if you look at the real effective exchange rate where most of us have forgotten it. Today as per the data available, rupee is being overvalued by around 11% and if you take a RBI tolerance level, something around 6-7%, there is a possibility of the rupee can depreciate technically somewhere around 45.30-45.50.
Second, though we are looking at a capital good infrastructure as coming in, we are also one of the largest current account deficit country where currency is appreciating. So the appreciation of the currency could be slightly slower. And the third thing, China in spite of all the hue and cry from other US and European countries, are keeping their Chinese Yuan somewhere in the range of 6.83. If rupee appreciates and China does not revalue their currency, we have a lot of cheap Chinese imports coming into India, so may be rupee could hold back some gain, may be around 44-44.50 for the next one month.
Media: Lets comment on Euro as well because the Greece concerns continue to be there. There are concerns about it spreading in the rest of the nations as well. How do you read into this?
K N Dey: Well honestly I look Euro as a joint family and it is very difficult to stay in a joint family. You have all other 16 members have some problems like the PIGS, like Portugal, Italy, Ireland, Greece, Spain, they all have problems and why would only Germany and France would bail them out? So I see problems in the Euro zone. Today it is Greece, tomorrow it could be Spain also, so in the long term I see Euro coming under pressure and 1.28-1.29 in next 6-7 months cannot be ruled out.
Media: When you talk about 1.28 kind of levels and when we talk about the net short positions, which are anyway at record highs. Do you see a concern there?
K N Dey: Obviously the birth of the Euro about 1999 was the means to give tussle to the dollar but once Euro reached its peak of about 1.60 close by, since then we are being seen the Euro has come under pressure and this pressure will continue for sometime, at least for the next one year. If Greece is bailed out, tomorrow some other countries will definitely come in and Euro will be definitely under pressure. It could be in the range of next 3-6 months 1.25 to 1.30 with some spikes at 1.33-1.34 levels.
Media: Currencies like Canadian Dollar and Australian Dollar trading at multi-month highs. Do you see the run-up continue?
K N Dey: This commodity currency run-up will continue and they will do well in this next 3-6 months, especially Aussie dollar and Canadian Dollar.