Strengthening of dollar may trigger foreign outflows: Piyush Wadhwa, IDFC

In a chat with ET Now, Piyush Wadhwa, Head Trading – Financial Markets Group, IDFC Ltd, shares his view on how movement of dollar may impact equities and bond markets.

ET Now: Let us talk about the recent depreciation in rupee. Do you think that it is all about global adjustment? It seems that the soaring dollar index (which is at 10-year high) is having a big impact on not only rupee, but also on other emerging market currencies. What is your view?

Piyush Wadhwa: We expect rupee to stay strong against a larger basket of currencies, but it should remain weak against the dollar. This is due to rising fears of earlier-than-expected hikes in the US interest rates. Rupee could be under pressure with respect to the dollar, but should have a positive bias against most global currencies.



ET Now: Are there concerns over the dollar-extended rally right now? It seems like more of a structural bull run. If the dollar index trades beyond 100, what would it suggests?

Piyush Wadhwa: At some point of time, it would start impacting dollar returns for the investors worldwide.

So, till the time you are making good returns on the assets there should not be any problem. But, the moment the asset return starts tapering in the local currencies, and dollar keeps appreciating, you run the risk of some amount of capital outflows. Therefore, some amount of deleveraging of the hot money could happen in case dollar continues to strengthen the way it has been doing. That is a risk for both equity as well as bond markets.