Rupee At 2-Week Highs; Will Do Whatever Is Required To Ensure Orderly Price Discovery, Says RBI Guv

Ajouté : 2026-05-25

[00:00:09]Welcome back. Well, the rupee, let's focus on that. That opened today at a 2-week high of 95.34 against the dollar versus Friday's close of 95.69, but has since strengthened even further. It is now trading at about 95.19 against the greenback. Now, a couple reasons for this relief rally that we're seeing on the rupee, of course, the oil prices. That's the big one, coming below $100 a barrel for the first time this month on the back of news, of course, over the weekend of a potential easing of tensions between US and Iran. Brent crude prices now at 98 uh dollars to a barrel. That's more than 5 and 1/2% almost 5.3% as we speak. What's also helping, secondly, is the RBI governor's comments that have come in in an interview to Mint saying that the central bank will do whatever is required to ensure that there is orderly price discovery in the forex market. He also made it clear that the RBI is not defending any specific level, but it will step in to curb any excess volatility and speculative moves in the forex market, adding that India has enough firepower with nearly $700 in the forex reserves. Sanjay Malhotra even suggested that the recent rupee depreciation may actually mean that the currency is now undervalued both in nominal and a real effective exchange rate terms, and that it could appreciate from hereon once tensions in West Asia begin to ease. Now, on the balance of payments from the governor, acknowledges that there is pressure from higher crude prices, but he also said services exports and remittances, they still remain resilient, and that keeps the overall BOP situation manageable in his words. He also pointed out to improving capital flows. He expects repatriation-related outflows to also moderate as equity valuations correct.

[00:01:48]So, let's bring in Jayesh Mehta, vice chairman and CEO of DSP Finance for more on the outlook for the rupee, which is now seen, uh you know, fair bit of recovery from the kind of levels that we saw on Friday, Jayesh. Thanks very much for your time here. You know, to begin with, uh you know, your view on whether the markets actually believe the Rupee is undervalued now and what your takeaway from the RBI governor's comments were uh that they'll do whatever is required uh you know, essentially you know, I believe telling the speculators, you know, don't bet against the Rupee.

[00:02:20]I think this comment was very much required. Maybe we will need more of reinforcing of that comment was followed by the action. So, you you see last week we saw you know, one rupee move in 5 days and stuff like that. I think that kind of situation definitely it will kind of cut it. Uh also it was reinforcement that they have enough tools if they want to when they want to intervene. And I think from this two points of view it's it's a pretty good at least that kind of communication is required but there is more communication required. That's the point.

[00:02:54]Of course, today is because of the US West Asia war as well as the crude being down. And right now, you know, the market is into more trading zone that dollar rupee is more into trading zone.

[00:03:05]If you really look at it microly, it's actually kind of following tick by tick what is crude doing, right? So, to that extent in last 10-15 days it's actually following a crude trajectory. But having said all of that maybe if the West Asia war gets over, we feel see that crude getting price back to maybe 80-85 or something. It will be a good relief for currency. But at the same time we have our capital flows which is a continuous outflow that were continued even before the before the war. And that's that's something will start dripping in once we get over the West Asia war.

[00:03:46]But you know, Jayesh, do you read a bit of a hawkish sort of you know, bent in the comments that are coming in from the governor and what does that mean combined with the fact that we've now seen fuel price hikes you know over the course of the last few weeks a couple of times or more the worries about pass through and inflation you know are you pricing in a rate hike sooner than perhaps the end of the year or so that the earlier consensus seems to have been as early as June is that a possibility at all?

[00:04:17]So I think that there was a fear that was a thing and there are people who say like you know RBI should do rate hike for currency and for India rate hike for currency really does not work because we don't really have debt flows from foreigners. What we have is equity flows from foreigner and and therefore we did the same mistake raising rate by into 2013. If you really raise rate does not help the equity market and therefore right now our problem is capital outflow from equity market if that goes more that could actually create problem. Now coming to inflation versus rate hike for inflation definitely because of the crude price and this quarter itself also there'll be a pass through impact on the inflation.

[00:05:04]Now of course they will have RBI will have to gauge where that inflation impact is if you think before the policy we may see some great positive news on the war side then if they are still below 6% I wouldn't think they need to raise the rate or anything at this juncture. Of course there are all economists and traders have been pushing them that they should raise rate for inflation but I would still say even in covid when we crossed almost 6% that time we more supported growth and when we have supply side impact supply side inflation and if it is temporary maybe we should support growth so that of course will depend on the MPC policy what they do it. But, yeah, 0.25 or 50 bps point here there does not really matter.

[00:05:53]But, you know, the simple question, Joyesh, is part of this relief rally that we've seen in the rupee, is some of it coming because the markets are reading these comments as hawkish? And if you don't see a rate hike, does that stability go away to an extent? And also, this increasingly interventionist strategy of the RBI at a time when, you know, the rupee has been in a slide.

[00:06:13]We've heard from the likes of Arvind Panagariya, D. Subbarao publicly talking about, you know, the futility of this kind of a policy. What do you make of the comments?

[00:06:24]So, I would say right now RBI just targeting is the usual statement that we are targeting the volatility, over excessive volatility. Naturally, they are not targeting a level. So, that's the that's the statement, but the underlying is I don't think and I I I would genuinely request I don't think it's a great idea is when people economists and other start talking about it like depreciating rupee good, it's not good for the country, right? We are a current account deficit country. How can depreciating rupee be good for us? So, I think main mind frame we have to have a towards appreciating rupee. That's the main mind frame the government and RBI should be convinced about and I think at some point of time.

[00:07:07]But, right now I think our worry is crude and when the crude settle down, the next worry we are still not out of the woods because we still don't have control on the FBI outflow and FDI selling in IPOs. So, I think these two outflows is really really hurting. I would say actually, if you really look at it, this is actually hurting more and then, you know, oil crude prices became you know, aggravated the things.

[00:07:34]Otherwise, if you look at we were 120 in 14-15, we we didn't go through this kind of pain because equity outflow was not the way it is currently and the crude impact and equity outflow impact is more or less the same and I think unless we stop that we are in for problem.

[00:07:53]Uh that's a difficult one to answer Jayesh but can't not help but ask. 96 96 is the level that we saw on the currency fair to assume or stick your neck out and say that with all the comments that have come in from the RBI the remarks made by the governor the steps taken by the central bank so far and with more potentially in the offing are we done with that kind of depreciation for the year and we see that that level of 96 96 no longer gets tested even though if we still remain above 90 for the rest of the year.

[00:08:28]So I think if the crude does not grow from here I think we I think we have more or less seen the low of our rupee for the time being but as I said like you know once the war settles down we need to really look at it. I think you know I've been making point this but of course equity is not my market but I've been making points you know one needs to really really look at it if the equity outflow is the sell outflow or is the uh trading profit which is going out. So I think and if it is trading profit which is going out it's not going to stop right so it's not completely like we don't have AI and we you know we are over valued and all that. I think there is something more to that till we fix that till we plug that then daily 2500 crores plus minus 500 crores outflow is a problem.

[00:09:21]Just a final question before we let you go Jayesh. This is on the overall growth outlook the impact that this crisis has had on growth for this entire year and what is it that can be done about it because you can't cut rates largely because uh you know of the rupee and inflation. But at the same time, higher inflation could have an impact on overall growth. Jayesh, uh would you uh Okay, I think we snapped that connection with Jayesh. So, uh it's a question for another time that we'll ask him when he comes uh back. Uh but