While some like Kanji Pitamber & Co's Gautam Ashra say that "it is no more a question whether the rupee will weaken, but when and by how much is the question," many like ING Bank's treasury head, Atul Sahasrabuddhe, remain guarded: "These things don't happen by pure market factors alone".

Wednesday's weakness in the local currency was driven by three factors: that it was the last trading day before the budget, and end of the month consideration with a two-day bank strike. The third was by far the most important: a sentence in the Economic Survey that read "the rupee's value must be monitored to ensure that exports remain competitive".

Says ING Bank's Sahasrabuddhe: "The 13 paise fall in the rupee should be seen in the light of these variable factors. I do not see the rupee weakening on account of the Survey or the Budget. That's reading too much. In any case, the Budget will not say what the rupee's value should be". At Credit Lyonnais, treasury head, PH Ramaswamy, is catergorical that "I do not think a rupee-fall is on. Trading volumes are down to a third of what they were to less than a $1 billion. Trades are lacklustre, and importers have covered their positions. And devaluation is not the way to make exports competitive". A similar view is echoed by HSBC's economist, Amit Gupta who feels that "in a market where volumes are down, price movements tend to be exageratted. And ahead of a major policy announcement, banks have bias towards long-dollar positions".

The rupee has held more or less steady after the Reserve Bank came out with stiff measures to defend the currency in August. And dealers point out that on several occassion over the last couple of months, the rupee has held firm despite a few state-run banks bidding for the greenback. Fears on account of a rising current account deficit with indications that it will be highest after the 1991 crisis at over 2 per cent of GDP and a weak export performance have forced analysts in recent times reason that a rupee fall is on, and warranted.

ANZ Investment Bank, in its report on Thursday, said that near-term technicals unambiguously point at a stronger rupee. "We find that the rupee is currently around 10 per cent overvalued and continued dollar strength against the basket of majors will further increase the currency risk. The rupee will hold strong against the dollar for a few more weeks while the possibliity of a sharp correction in 1999 remains high," said ANZ even as it added: "Stability of rupee has been remarkable in the past eight months. The rupee was virtually pegged against the greenback at 42.50 level. Comfortable inflows (including RIB) have helped rupee remain stable. India's foreign currency reserves have moved up by $3.7 billion during this period".

While ANZ Grindlays Bank's head of forex trading, Sunil Sharma, said that though Wednesday's weakness was definitely on account of a few factors materialising at a time, political uncertanity, and poor performance on the export front remain," Mecklai Financial Services' vice-president, Ravi Vasantraj notes: "As a country, we always look at negatives. A devaluation is called for to restore price competiveness in the face of a runaway inflation, or when their are compulsions to hike interest rates. The Reserve Bank has no such issues before it. The Survey, incindentally calls for a reduction in interest rates. I would be very surprised if the rupee weakens on Monday. If anything, the rupee will gain to 42.50 or higher levels".

Commerzbank's treasury-head, K Harihar, offers more fundamental reasons to rule out a further weakening in the rupee: "Other East-Asian currencies have gained over the last year," says Harihar, adding: "and to that extent, the rupee has effectively lost ground. Export competitiveness does not neccesarily mean a weaker rupee". Over the last year, Indonesian Rupiah has gained to 8,100 to a dollar from 15,000 levels, Thai Bhat to 36 from 55 and the Korean Won to 1,220 from 1,500.