Rupee will remain in 59-60 range: Tanvee Gupta Jain

In a chat with ET Now,Tanvee Gupta Jain, India Economist, Macquarie Securities, shares her views on currency appreciation.

ET Now: What kind of a bearing could the currency appreciation have? What is your base case for the currency?

Tanvee Gupta Jain: According to the real effective exchange rate model, the fair value of rupee according to all that modelling exercises is somewhere around 59-60. However, if we get a very strong NDA government, strong FII sentiment improvement and FDI inflows increasing manifold, then there is a likelihood of 3% to 5% appreciation in the currency in the short term.

However, we need to realise that RBI would have to rebuild the foreign exchange reserves because we cannot afford a very strong currency because the entire growth recovery in FY15 versus FY14 is based on external demand. The moment currency appreciates; it will start hurting our exports growth.

My base case for rupee will continue to be somewhere in the range of 59-60. A short term rally will be there but it won't sustain for long. I would prefer RBI intervening, rebuild forex reserves which are needed because we are living in a times of global risk aversion and there is the possibility that during the course of the year you see EM capital outflows concern again start emerging across the world.