Rupee To Weaken More If Turkey Crisis Worsens, Says JPMorgan’s Sajjid Chinoy

The Indian currency could weaken further after breaching the 70 mark against the dollar today if the U.S. unit strengthens or the financial crisis in Turkey worsens, according to JP Morgan’s Chief India Economist Sajjid Chinoy.

Chinoy expects the rupee to continue tracking other emerging-market peers.

The Indian rupee fell past the 70-per-dollar mark for the first time, weighed down by an emerging market currency rout driven by Turkey. It weakened 0.2 percent to 70.08 against the dollar at 10:35 a.m., following a 1.6 percent depreciation in the previous session, its worst performance since September 2013. The currency is down almost 9 percent this year, making it Asia’s worst performer.

Here are the highlights from the conversation with Sajjid Chinoy:

• If the rupee were to weaken going forward in line with all its trading partners, then the local unit would be weaker against the dollar. But for a broad basket of currencies which matters for the economy, the rupee would be at the same level.
• With all these moving pieces, it is not meaningful to have a dollar-rupee target.
• If you look at the trade-weighted rate, the Indian currency has strengthened a lot between 2014 and 2018.
• In real terms, the rupee appreciated almost 20 percent in the last four years.
• We are still stronger compared with 2014 and from a competitive viewpoint.

On Inflation

A lower-than expected retail inflation in July will give India’s central bank enough space to “stay on hold at the October policy review”, Chinoy said.

Consumer price inflation in July rose 4.17 percent compared with the same month last year, declining from the five-month high of 4.9 percent in June, according to data from the Central Statistics Office.

Here’s what Chinoy said about consumer inflation:

• Yesterday’s print gave everyone some relief.
• The headline inflation was below expectations but the internals of the print were even softer.
• For at least two months in a row, we have seen the momentum of core inflation gap down.
• Need to see if this trend persists.
• The increase in food prices was muted than typical and we have not seen the impact of minimum support prices just yet.