Re around 60-61.5 range vs dollar good to keep FII play intact: Moses Harding, IndusInd Bank

In an interview with ET Now, Moses Harding of IndusInd Bank shares his views on the rupee. Excerpts:

ET Now: Your reaction on the rupee fall?

Moses Harding: The market was confident that the RBI will protect, but unfortunately the rapidly-weakening euro and stronger headwind have made the RBI intervention in effective. So now euro dollar is likely to weaken below 130 towards 127.5-128.5, and with that the rupee will be under pressure and the RBI-supplied dollars may not be that effective.

ET Now: What is your expectation? What tools will RBI or government come up with? When the rupee does slide like that, do you think this is the situation to start acting?

Moses Harding: Basically the authorities also assumed the fact that the rupee will stay weak in the short term till macro issues are addressed and FII, FDI limit hikes are in place. Given the need to rethink the FII pull out and to keep the dollar rupee rate attractive for FIIs for fresh investments, having stability of the rupee around 60 may be good for the system in the short term.

ET Now: What is the view here? Seven odd months of forex reserves, do you think the RBI can actually come in and try and stem the flow in a meaningful way or just stay away because it could get worse?

Moses Harding: There is no quick fix solution at this stage. All the RBI can do is bring back its administrative structure so that there is no kind of speculative or over hedging demand coming in.

But anyway, the market is in tune towards a 59.50, 60, 61.50 consolidation. So anything above 60, towards 61.5 will be shallow, but from the other side I feel this as a very good opportunity for FII to pump in dollars and that new 10-year yields are above 67.5 and more till 70, that will attract FII pressure. I think 60-61.50 range stability should do good for the system to keep the FII play intact.