Also Read: RBI tightens daily borrowing norms to douse rupee fire
Below is the edited transcript of the discussion on CNBC-TV18
Q: On Monday, the Reserve Bank of India (RBI) acted to curb gold imports and today it is trying to prop up the rupee. After the currency measures announced on July 15 this is the latest intervention by the RBI to stabilise the currency market. How do you think the markets will react to this initiative?
Kapur: The markets did anticipate more liquidity measures towards the end of last week. These measures are in line with the central bank's measures announced on July 15. What is also critical, is that the central bank has refrained from making any change in the cash reserve ratio (CRR) and the repo rate. This is clearly a signal by RBI that these measures are short term in nature.
Q: Does this mean the RBI will not announce any initiative on July 30?
Kapur: Regarding the policy, it involves larger issues at play. Growth in the first quarter of this year — going by the Purchasing Managers Index (PMI) and the latest Index of Industrial Production (IIP) —has weakened again. The three drivers of growth, consumption, investment and exports are struggling under a consistent slowdown. So, those concerns will weigh on the RBI on July 30.
However, considering the kind of pressure on the rupee, the RBI had to take some action. It did by choosing to tighten liquidity, increase the cost of carry to make speculations on the rupee difficult. At the same time, the central bank is trying to prevent long-term bond yields from go up and this could be a signal that rates should go up. At the moment, the RBI is keen on tightening liquidity and addressing the problem purely on a short-term basis. I don't think the policy on July 30 least warrants a rate-hike at this stage.
Q: To what level will the rupee appreciate on the impact of these measures?
Kapur: A lot of movement in the rupee is on account of global developments around tapering of the US Fed's quantitative easing (QE). That is also driving emerging-market asset classes across the board and I think rupee has clearly found some degree of stability.
The fact that RBI has signaled to investors of looking at options to protect the rupee from hereon clearly indicates that at these levels there is some degree of discomfort because the rupee is undervalued by 6-7 percent, perhaps even higher in real effective exchange rate terms. So, I think it should settle.
At this point in time, I think these measures should see the rupee settle at around 59 for the time being. However it all depends on how the market reacts to issues around the US Fed's announcement because that has really been the bigger driver at this point in time.
Q: How do you think the bond markets will react tomorrow?
Harding: The RBI's recent measure has given a kind of stability in rupee at 59.60 instead of 62-63. But with the rupee at risk at 60, the RBI initiated the next round of measures technically making operative policy rate at the Marginal Standing Facility (MSF) rate at 10.25 percent. That definitely will push the forward premia up. That will bring in exporters supply from the forward markets and keep the importers at bay.
So, that is the immediate takeaway on this second round of liquidity action.
Q: What about yields? Where do you see yields headed?
Harding: The 10-year bond yield — the shorter end of the rate curve is going to move up. It is not only a liquidity squeeze, but a credit squeeze as well because most of the excess Statutory Liquidity Ratio (SLR) to the tune of Rs 45 lakh crore - 50 lakh crore have to be funded out of deposits and that means there will be limited cash available for the credit.
So, it's a combination of a squeeze on liquidity and credit. Rates will move up and the 10-year should probably settle at the higher end of 8.25 to 8.75 percent.
Anda sedang membaca artikel tentang
Banking experts hail RBI’s short-term rein on rupee
Dengan url
https://citraasa.blogspot.com/2013/07/banking-experts-hail-rbiaaas-short-term.html
Anda boleh menyebar luaskannya atau mengcopy paste-nya
Banking experts hail RBI’s short-term rein on rupee
namun jangan lupa untuk meletakkan link
Banking experts hail RBI’s short-term rein on rupee
sebagai sumbernya
0 komentar:
Posting Komentar