Thursday, 8 August 2013 00:14
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Reuters: The rupee ended weaker on Wednesday due to importer dollar demand as the Central Bank, eager to hold the greenback below Rs. 132, forced dealers to shift to forward trades.
Some dealers said they moved to one-day forwards instead of spot trade after the Central Bank’s earlier direction to banks not to accept bids above Rs. 131.60 per dollar.
The one-day forward ended weaker at 131.72/78 per dollar from Tuesday’s close of 131.73/75. Central Bank officials were not available for comment.
Dealers said the pressure on the currency remained as exporters adopted a wait-and-see approach, while remittances had also dried up. The downward pressure on the rupee could intensify if there were no dollar inflows in the short term, they added.
The rupee has fallen around 4% since 7 June, after foreign investors started to pull out of Treasury bonds due to a rise in US Treasury yields.
Data from the Central Bank, which has stopped publishing foreign holdings in long term T-bonds separately since 28 June, showed total foreign holdings in Government securities rose 1.2% between 5 June and 2 August, which currency dealers attributed to foreign buying in short term T-bills.
Dealers expect the rupee to move in a 131.50 to 132.00 range in the short term and continue to depreciate unless the Central Bank steps in with monetary tightening measures or dollar inflows increase significantly.
Sri Lankan shares rose on Wednesday to a near one-week high as investors bought select stocks such as Nestle Lanka and Sri Lanka Telecom (SLT) amid easing retail selling.
Analysts said investors were cautious and waited for direction despite the Central Bank’s policy easing as concerns over a weakening rupee and high lending rates dented sentiment.
The main share index closed 0.5%, or 30.34 points firmer at 6,151.79, its highest close since 2 August.
Nestle Lanka PLC, which produces and markets food and dairy products, rose 10.29% to 2,259.80 a day after Sri Lanka ordered immediate suspension of New Zealand milk powder imports and recalled products from the market.
Shares in leading fixed line telephone operator Sri Lanka Telecom rose 2.30% to Rs. 40 a share.
Turnover was Rs. 725 million ($ 5.51 million), less than this year’s daily average of about Rs. 928.7 million. Foreign investors were net buyers of Rs. 208.3 million worth of shares, extending the net foreign inflow so far this year to Rs. 16.31 billion.
