MUMBAI, January 17: The Reserve Bank of India's (RBI) is defending the rupee at a wrong level, the London-based head of emerging markets research at IDEA said on Friday.``Our view is that fundamentally, the RBI has come in defending the wrong level, 40 (Rupees to the dollar),'' John Davitte, head of emerging markets research, IDEA said in a faxed commentary.
``The rupee 40.0 to the dollar does not represent fair value on the rupee to us, and the Finance Minister is quite wrong to suggest that it is,'' it said.IDEA's real effective exchange rate (REER) estimate point to levels closer to 45.00, Davitte said.
``...This intervention is doomed to fail as India's balance of payments deteriorates in line with an uncompetitive rupee," Davitte said.
In the near term, the RBI steps will aid the rupee to stabilise around 39.00-40.00 by making moves to short the local currency more expensive, and also by bringing better volumes back into the foreign exchange market, he said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
