Below is a verbatim transcript of the interview on CNBC-TV18
Latha: What is the view now on EM currencies as a basket? Is there more selling to happen?
A: Unfortunately, there is very little to latch onto in this week that will suggest there is going to be a reversal. To be clear, a lot of this volatility is not emanating from Asia. It is very much other EM markets, in particular Argentina and Turkey. And whilst there is some assertion, there is contagion, there is very little actually catalyst. This is coincidental in terms of timing.
If you look events this week, these are not likely to provide any comfort in terms of reversal, namely whether it be the domestic meeting in India in terms of the Reserve Bank of India (RBI), even if central bank is likely to go on hold, there will be some concerns about monetary policy framework.
But in terms of broader elements, you have got the Fed tapering still likely to be continuing on Thursday and then we have got further PMIs from China in terms of showing economic sentiment whether it be HSBC's own final series or the national one. Those are not necessarily enough to see the things come down.
So yes, it looks like pressure would likely to remain at least for this week.
Latha: I want to ask you about his relative outperformance of Asia itself and more particularly India. We were just looking at currencies comparing them to their September lows and India's is the only currency, which has significantly appreciated since its September lows. Do you think Indian rupee will get away with minor bruises? What are the levels you are looking at?
A: Bruises, I think, is an appropriate phrase rather than traumas we saw in summer month. It is not unique to such as India. There are two currencies that stand out—at least if you take from short-term. If you take it since Wednesday, the reason why I take that time span is because that is when the devaluation in Argentinean peso occurred, and then we saw some very sharp moves on the Turkish lira. But if you look at in Asia the only two currencies that moved the most is the Korean won.
But again that is going to be welcome because the sharp appreciation we saw last year, certainly against the Yen. As you rightly said, in terms of India, that is the second one, not necessarily in terms of September. But since Wednesday, we saw some retracement. It is retracement because of the hard work and hard won policies that we have seen in September. If you go back to flow of funds in India so far this year, very strong appetite we might see some trading water and as you said bruises, but not necessarily too traumatic.
Sonia: What could the downside for the Indian rupee look like? Do you think 6300 could get breached today and do you think the central bank will step in to stem any of these losses?
A: I cannot comment on specific intervention. If you look within Asia ahead of India we have seen some smoothing operations by other central banks likely to have been done and I would not rule that out for India. Again not specific to domestic factors, but external events, yes, not necessarily today, but there is likely to be some pressure on 63. But the main thing is we are not going to see a rerun of this summer month, because this is not a balance of payments (BOP) crisis and not the need for another round of reforms.
The tentacles are touching Asia including India, but not necessarily going to tilt it too far in terms of currency weakness.
