Indian rupee notes and coins displayed in Mumbai, India (Photographer: Santosh Verma/ BloombergNews)

Worst Emerging Market Currency Nears Bottom for This Treasurer

(Bloomberg) -- The past month’s worst performing emerging market currency is nearing a bottom, according to the head of global treasury at Asia’s largest software exporter Tata Consultancy Services Ltd.

The Indian rupee has dropped 2.9 percent over a month, the biggest slump among 24 emerging markets tracked by Bloomberg. It fell to a record on Thursday and is inching closer to 74 against the dollar. The currency won’t drop much further with the Reserve Bank of India and government taking “adequate measures” to arrest declines, T Venkatesan, TCS’s global treasury head, said in an interview at his office in Mumbai.

“I don’t see rupee breaching 74 against dollar. That should be the cap,” Venkatesan said. “We are already close to the top of this move.”

Worst Emerging Market Currency Nears Bottom for This Treasurer

India’s currency has declined for six straight months, prompting analysts at banks such as Barclays Plc. and Mizuho Bank Ltd. to predict a weakening past 74 per dollar by the end of the year. Weighing on the rupee are ever-higher oil prices and a current account deficit that makes India dependent on foreign inflows. Measures by the central bank and government -- including raising import tariffs and easing some overseas borrowing norms -- have as yet failed to revive the confidence of investors.

The central bank this week eased norms for state-run refiners to borrow money from overseas markets in a bid to support the rupee, removing a $750 million limit each on the companies. The government on Thursday also cut retail fuel prices to boost consumer spending on things apart from energy.

Given concerns around inflation and the currency, the central bank will probably raise interest rates 25 basis points on Friday, adding to two increases this year, according to the median estimate of economists in a Bloomberg survey.

India’s rate-setting panel will deliver at least two hikes in benchmark borrowing rates this year, estimated Venkatesan in the interview, adding that his views on the currency and rates were his own and not TCS’s. “If the Fed hikes, we should see another two hikes next year,” he said.

TCS is a large investor in India’s bond markets with a little more than half of its 477 billion rupees ($6.5 billion) in cash reserves invested in government securities as of March 31, according to its annual report. The rest is spread over deposits, mutual funds and corporate debt.

The rupee traded 0.5 percent lower at 73.6925 per dollar as of 4:31 p.m. on Thursday.

The company hedges its currency exposures for about two to three quarters ahead, Venkatesan said. “While in the short-run there are always pitfalls. But in the long-run, hedging is going to make you gain only.”

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