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Rupee has breached 42.50. Experts believe, in the absence of any intervention in the markets, it's very difficult for rupee to appreciate. In the next few sessions, rupee is likely to continue to weaken.

Subramaniam Sharma of Greenback Forex said he saw it coming. "It was on the cards this morning because the rupee closed on a weak note yesterday. Crude prices were also looking up around USD 126/bbl and it was very clearly an indication that the rupee may slide further," he said.

He expects RBI to take some action against this steady downfall.

While Agum Gupta, Head - Forex, Standard Chartered Bank thinks 43 is not very far away for the rupee. "We are already at Rs 42.50 and the way we have been moving 40 to 50 paise a day, has become pretty easy. So I don’t see why Rs 43 can be considered to be too far away," he said.

In fact, Sundeep Bhandari of Standard Chartered Bank is also of the view that 43 is conceivable for the rupee. He said, "It looks like the rupee is headfirst towards the 43 level, I would not relate to 44. The sentiment appears to be one way, inflation, oil prices, exporters holding back, flows are flat and the current account deficit, so the sentiment is very negative and in the absence of any support certainly it could weaken further."

All experts agree that this downhill trend that the rupee has adopted is creating a lot of negative sentiment in the market.

In the longer-term, Bhandari sees the rupee coming back to 42.5 levels by September. "I think we are going to see considerable volatility over the next weeks, perhaps months, on the rupee."

Bhandari's advice to importers is to hold on because, "If one can wait a month, the rupee will get a bit cheaper, but the index in the few session is likely to weaken. So towards June-end and July, we can see rupee at 41.50-41.70 levels."

It seems that there might have been some position unwinding in the market. Ashit Parekh of IndusInd Bank said, "I think the speed at which we have seen weakening of the rupee has taken everybody by surprise. After a break of 42.25-42.30 this morning, it just went straight upto 42.60-42.65 levels. I think for the next few days 42.75-42.80 even touching 43 level is definitely on the cards."

He thinks the only way rupee can get stronger again is through intervention by the RBI, or a sudden overnight correction in the oil market.

Both Bhandari and Parekh sense that exporters have been lying low. "Quite a lot of them probably have already booked part of their exposure at 41.50. They just need to wait on the sidelines till the buying subsides and then start booking in exports," said Parekh.

Bhandari explains, "I think the exporters are holding back and they sense that the rupee is going to weaken further, hence they are holding back."

Source: Moneycontrol.com