00:00Essentially the rules do try to curb short selling and authorities as we all know don't like short
00:07sellers because it does put a lot of pressure on their currencies. Now that said the rupee has been
00:12under tremendous pressure as we all know because of rising oil prices. India is a huge oil importer
00:20and as you correctly pointed out has there is a floor for now but how long that actually holds
00:25we've seen the rupee rally more than a percent against the dollar. Well that remains to be seen.
00:30Of course the rupee the worst performing currency in Asia. Ruth stick around let's get perspective
00:35from Abbas Khashvani director Asia macro strategy at RBC capital markets. Well the weakness will persist
00:43at some point. I think it will yes because what they've done essentially is they've clamped down
00:49on speculators ability to short the currency and I won't quibble about onshore versus offshore there's
00:56a whole argument about how much onshore matters versus how much offshore matters but let's just
01:00say that they have dealt a blow to speculators to bet against the currency. The problem is the pressure
01:06on the rupee is not just from speculators it comes from real demand for dollars in the economy.
01:11Even before all of this kicked off in the Middle East India had a very wide trade deficit and that
01:16deficit is going to widen from around thirty billion dollars a month to thirty four thirty five
01:20billion dollars a month. Right. So this is going to only mean more pressure on the currency beyond
01:25the short term release and pressure short term. How long do you think this rupee strength can go on
01:31for. I mean they've given them until April 10th to basically close up their short positions. So I think you
01:38could get a slow bleed off those positions going into that deadline. But I would be surprised if we had
01:44more
01:44than a couple of days of rupee strength just because like I said every day that goes by there is
01:49a
01:49refiner somewhere in India that has to buy oil. So they're buying dollars and they're buying more
01:54dollars than they previously needed to just because of the price of oil. Now there's even reports of
01:59Indian refiners paying a premium for oil. Remember before the war they were enjoying discounts on some
02:04Russian crude. Now they're scrambling to buy their oil from to make up for the loss of their Hormuz supply.
02:12And now they're basically paying premiums. So there's a lot more dollar demand. Are there other
02:16tools in the RBI toolkit to support the currency? There are lots of other tools. I mean I think I
02:23think if we look at what today illustrates it is it shows a limitation in the in every central bank's
02:32abilities to just sell dollars on a protracted basis because the RBI have been on the more
02:37interventionist side of the spectrum. And what they've done is they've sold a lot of dollars both
02:43spot dollars but also forwards to curb depreciation pressure on the currency or at least meet dollar
02:49demand. And as a result of that their reserve cover their reserve buffer has thinned considerably
02:56over the last few years. And now they're on to I guess what you would call the secondary or
03:01ancillary sorts of tools to depreciate to ameliorate the depreciation pressure. Today is one of those
03:06examples. They could also impose on other places in Asia like Malaysia have imposed restrictions on
03:12the trading of offshore India. I don't think India is in that place yet. If you look at places like
03:17Indonesia they have they've announced a number of innovative tools to basically help onshore people
03:23manage their dollar demand through contracts with the central banks rather than through the market.
03:28These are very innovative tools. I don't think India is in a place to have to worry about these kind
03:32of measures just yet. But it does show you that they are at they're getting to the point where
03:35they're considering the limitations of their existing tool kit.
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