rupee against dollar: From 80, Re can go towards 81. How fast we go depends on how RBI looks at it: Madan Sabnavis

How far can the rupee go post 80? A lot of people so far have been saying not to look at it in terms of numbers and that the rupee at 80 is no different than the rupee at 79 or 78 or 81. Does this psychological barrier matter?

I think it is just a matter for the market because the market looks at rupee in terms of full numbers. So, 80 looks a bit exciting and that is why everybody gets spooked about it. We should remember that the way in which the rupee has been depreciating is commensurate with the dollar strengthening. The question is how long will the dollar strengthen?

The Federal Reserve is trying to increase interest rates to curb inflation and to slow down the excess demand means they are slowing down the economy. When the perceived strength of the US economy comes down, that is the point of time when there will be some correction. Logically, it means that from 80, we can go towards 81. How fast we go will depend upon how the RBI looks at it.

RBI needs to ensure that the rate of depreciation in India is just about at the median level of all other comparable currencies if we do not lose our export competitiveness and at the same time, do not go galloping in the down direction.

Are we going to see an aggravation of the slowdown? Factors like commodity prices softening to some extent are truly heartening?
Yes, absolutely. That is going to be one of the factors to ensure that the kind of acceleration which we have seen in the depreciation will probably slow down. If we go back towards the beginning of the calendar year, we have been losing around a Re 1 per month. Today, in July, it came close to Rs 2. So one would have logically felt that we would have touched the mark of 80 in August, but it has happened in July probably because every time the Federal Reserve meets or is going to meet, there is a sense of panic in the market and the rupee goes down at a faster rate. It will all be the case of how controlled or in what controlled manner RBI actually manages it through intervention.