A Prasanna, chief economist at ICICI Securities Primary Dealership, on Thursday, said that the rupee is reacting to crude but the dollar index needs to be looked at.
The rupee tumbled 54 paise to close at 74.98 (provisional) against the US dollar on Wednesday, October 6, as a stronger greenback against key rivals and rising crude oil prices weighed on investor sentiment. At the interbank foreign exchange market, the local currency opened at 74.63 and witnessed an intra-day high of 74.54 and a low of 74.99 against the US dollar in day trade.
The local unit finally settled at 74.98 a dollar, down 54 paise over its previous close. On Tuesday, the rupee had settled at 74.44 against the US dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.41 percent higher at 94.36. Meanwhile, Brent crude futures, the global oil benchmark, declined 0.55 percent to USD 82.11 per barrel.
Also Read: A defining moment for RBI monetary policy
“The rupee is reacting to crude but you need to look at the dollar index also, the dollar is strengthening, especially Asian currencies and that’s also a big factor. Therefore, in terms of where the rupee is headed, I would say that it is completely Reserve Bank of India’s (RBI) choice,” Prasanna said, in an interview to CNBC-TV18.
“At any point of time, if RBI chooses, they can intervene and hold the levels. So, it’s up to the RBI to draw the line on the sand. I think, probably around Rs 75 (to a dollar) they will draw the line. I don’t think it’s going to be a one-day treat,” he said.
According to him, the rupee is likely to move in line with other peer currencies. “If other Asian currencies are also depreciating, they (RBI) do not want rupee to remain strong,” said Prasanna.
(Text input from PTI)
For the entire interview, watch the video