Rupee weakness looks to be on the cards: Arvind Narayanan, DBS Bank

In a chat with ET Now, Arvind Narayanan, DBS Bank, says that there is a chance that money will move out from emerging markets into developed markets. Excerpts:

ET Now: Rupee is now almost at one quarter low. The common linkage here is strength in dollar index means weakness for rupee. Do you think now we have reached crucial levels and the global impact is going to be having a further impact on rupee?

Arvind Narayanan: I think the two big events which have happened in the recent past, one is, of course, the demonetisation in India and the other one is the Donald Trump election. Both have been a surprise for the rupee. Sentiment does look slightly week in the short term for different reasons. Donald Trump is an unknown quantity and hence emerging markets are looking battered here. US interest rates are going up a lot, so there is a chance that money will move out from emerging markets into developed markets. Similarly in back home because of the demonetisation drive, there is expected to be a short term pain. There could be a slump in consumption activities, onshore real estate prices could be down that also is hurting sentiments domestically.Looking at this, I think rupee weakness looks to be on the cards and it is also in line with what is happening with Asian peers. So yes so there could be some more weakness in the rupee.

ET Now: When you say some more, how much more could we look at in the next few days?

Arvind Narayanan: Unfortunately, it is quite dangerous to try and predict a level, but if I had to call out a level I will watch out for, it will probably be more towards 68.20 to 68.30-68.40 kind of levels because once we reach that level, the depreciation probably seems in line with let us say what is happening in China and similar countries and also probably beyond that would look excessive and I would imagine the central bank would come in and start selling dollars at those levels. So I would watch for 68.20, 68.40 kind of levels.