In an interview to NDTV Profit, Jamal Mecklai, CEO of Mecklai Financial, speaks about how the currency market is going to perform ahead. He expressed concern about the rupee as it fell about 1 per cent in trade today following general weakness in global stock markets. “I don’t expect the rupee to touch the 50 per dollar level any time soon,” he added.
As far as the euro is concerned, he said that the dollar was not strong due to the problems in the Eurozone.
Below is the transcript. Also watch the accompanying video here.
- How is the rupee looking to you?
For the last two weeks, especially since the Prime Minister took over the finance ministry, the market sentiment has improved. We saw a jump in the dollar-rupee exchange rate. Interestingly, what we have seen in the corporate sector, people seem to be selling at the 55 level. The global scenario is pretty difficult. Europe is in a mess, China is slowing down a bit. The US is going to surprise on the upside. My belief is that we have gone through a period of risk-on and risk-off and it is going to change. We have moved into a dollar bull-run. In the last ten years, we saw the dollar falling. But nothing goes down forever. So, I think that poses a risk to the rupee.
When I'm looking at the rupee today, which is at 55.58, there are two parts. When you go back to 2007, the sentiment was hugely positive. Money was pouring in and that's why the rupee was overvalued; we had gone down to 40 per dollar during that time. Last year or so and it has gone in the other direction. If the sentiment was calm, then I believe that the rupee would come to 52/53.
Global sentiment is still negative. I believe that sooner or later, the euro will have to split and it is sensible for Germany to step out. They run one kind of game; everybody else runs another kind of game.
- The undertone in the European region is negative. Will the dollar rally just on the basis of that?
- In the market, there is no way to know that because of this, that is going to happen. My sense is that the dollar bull-run is just like a cycle. One of the reasons it is not stronger today is because of this whole rupee problem. What will happen if the Eurozone splits? The market believes that when the Eurozone will break up, money will run out of the dollar. This is one of the reasons why the dollar is not going up the way it should. Now the Barack Obama election is coming up. Obama is still the favourite. But he is perceived to be more pro-business and Obama will win and that is one thing that will keep the market off balance. Nobody actually knows what will drive the market.
By the next May, the dollar value of the rupee will change. By then, with a stronger dollar, commodities being down, the sentiment would be better. So, I don't think it is going to get terrible. However, it can become worse.
- How much of relief could you see in the currency?
- It is difficult to tell. If the government doesn’t do anything, we could see the rupee falling further. I don’t know why everyone is waiting for the Presidential elections. If they do multi-brand retail, diesel de-regulation, urea subsidy, etc, one should see some improvement. Let's understand this, if the sentiment is positive, the money coming in from outside will push the rupee higher. Right now, the global money is not moving around very much. I'm not looking at 50 any time soon.
- I was reading one of your articles. You have mentioned a range of 52-60. Should I believe that the rupee will move in that range?
- I think for 2013-14, the rupee will move in a range of 50-65 per dollar.