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Barclays +ve on $: ‘See 64.5 for rupee, 1 for euro by Dec’

After touching the 100 level, the US dollar has retraced back to about 97. Barclays Barclays’ head of forex for Asia-Pacific Mitul Kotecha said in light of the Fed’s dovish stance, it may continue to take a pause in the very near term but maintained its medium term outlook to be strong.

While stating that the rupee (currently at about 62.2, after logging seven days of straight gains) may continue to “capitalize” on some of the dollar’s near term weakness, he added that such upside would be limited. “The rupee has gone about as far as it can go.” Kotecha said. He expected the rupee to slide back to 63.8 by June and 64.5 by end of the year.

The dollar’s expected medium term strength will also take a toll on the euro (currently at 1.0935). “Our June forecast is 1.05 for euro-dollar and parity by end of the year.”

Below is the transcript of the interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Do you think the dollar index has seen the bottom for now and that we should expect it to climb back, what are your ranges for the dollar index as well as for the euro-dollar for the next couple of months?

A: We see the dollar at the moment having retraced and paused on the back of the relatively dovish Fed statement last week and I think the overnight data in terms of the inflation, which came in over the first monthly increase in US consumer price index (CPI) in three months has given a dollar a little bit of support overnight but we don’t see the dollar extending gains in the coming weeks.

If anything I think the Fed’s more dovish stance last week has put a bit of a break on the dollar for now. Medium-term we still remain bullish on the dollar but I think for now it appears to be pausing.

Sonia: What about the rupee then, it has been seven straight days of gains for the rupee, what is your own prognosis?

A: Rupee has been capitalising on this dollar consolidation and I think that will probably continue in the near-term but again I don’t look here for the dollar to weaken much further from these levels. So I think again the implication is that the rupee’s upside from here now looks very limited. I think it has probably gone as far as it can go in the very near-term.

Latha: It can strengthen as far as it can go, so you expect 63 per dollar sometime in April or May?

A: Currently we are forecasting dollar-rupee to move higher in the coming months and we haven’t changed that. At this stage, we were forecasting 64.5/USD by the end of the year. So we do see — our current forecast to dollar/INR for instance is 63.8/USD by end of Q2.

Latha: You are referring to the calendar year?

A: Yes. End of Q2 means end of June 2015.

Latha: I wanted your numbers as well for euro/dollar and the dollar index. You don’t see too much of weakening in the dollar, so do you see it go back above 100, what are the levels by June 30 – December 31?

A: If you we look at the technical levels, we do see resistance on euro/dollar around 1.1035 levels and then 1.11. We would be looking to sell into these sort of levels and again we don’t expect euro to make much more headway from these sort of levels.

Latha: Does it go back to 105 which we saw it touched sometime in this quarter, next few months?

A: For euro/dollar we are expecting further depreciation. Our forecast at the moment is 1.08 for the end of Q2 again end the June and parity remains our forecast by the end of this year.

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