According to GTB treasury head A Anchan, pressure on the rupee is unlikely to be strong as oil prices are on the slide and imports are not rising.

Speaking at a seminar on the euro organised by the bank, Anchan said the rupee can come under pressure on a particular day and fall by as much as 20 per cent. But over a longer period, the rupee will recover and depreciation on an annual basis is unlikely to be more than 7-8 per cent, he added.

The rupee cannot always be on even trajectory as oil prices are unnaturally depressed and imports are also bound to pick up once the economy begins to edge out of the recession, he said.

In a scenario where the economy is in the process of globalising, the currency can come under pressure on account of several factors. Thus it is essential that corporates evolve a strategy for managing their exposures, he said. ``It is not a wise strategy tocover the entire exposure or leave the entire thing open. It is important that the position is constantly studied and a decision taken on how much should be covered at any particular point,'' he added. If a company is in a position where it has exports to counterbalance its imports, it should evolve a strategy for matching its residual gaps, he said.

Political developments can destabilse a currency as was witnessed at the time of the nuclear tests undertaken in Pokhran in May, he said. ``In the aftermath of the tests, economic sanctions were imposed on India which put a downward pressure on the rupee,'' Anchan said. As uncertainties are growing, the case for hedging cannot be overemphasised, he said.

The value of the rupee vis-a-vis the dollar is currently a function of the demand-supply position of dollars, he said. In the macro-picture, the value of the rupee is currently decided by the external position, depending upon as to what kind of a scenario exists in immediate neighbourhood.

Also exports, thelevel of inflation and the fiscal deficit impact on the value of the rupee, he added.

Speaking about the euro which comes into operation from January 1, 1999, MV Subramaniam, senior dealer, GTB, elabortated on how the new currency, which will aggregate the strenghts of 11 European nations, holds the promise of giving strong competition to the dollar.

India currently has 25 per cent of its exports with Europe, but only 7.2 per of its transactions are denominated in European currencies. With the option of denominating their positions in euro now, companies can lower their transaction costs, he said. While the exchange risk will be lower because of the single currency, the credit risk needs to be carefully studied, he added.