Thursday, 16 October 2014 00:09
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Reuters: The rupee ended weaker on Wednesday due to dollar demand from importers and downward pressure on the local currency was expected to continue on foreign selling in Government securities, dealers said.
The spot currency ended at 130.75/95 per dollar, compared with Tuesday’s close of 130.65/70.
“There is pressure to depreciate. Imports have also picked up,” said a currency dealer asking not to be named.
“The dollar demand is picking up. Exporters have stopped buying forwards and they are just managing with minimum requirement. We expect a further fall in the rupee because lower interest rates have resulted in a rise in imports and foreign selling of Government securities.”
In a surprise development, yield in 364-day T-bills rose 11 basis points to 6%, its first rise since 20 December 2013. Currency dealers said this was a confusing signal in a falling interest rate regime.
Three-day forward or spot next closed at 130.90/131.00 per dollar with compared with Tuesday’s close of 130.70/75.
The Central Bank in the last week of September limited the spot range to between 130.40 and 130.50, to prevent any sharp falls amid heavy selling in stocks and a pullback by foreign investors from Government securities.
Some currency dealers said the rupee would stay steady despite the downward pressure at least until year-end on Central Bank intervention and as foreign currency reserves stand at more than $9 billion.
Sustained selling by foreign investors in Government securities, rising imports in a multi-year low interest rate environment and the strengthening of the dollar globally are putting downward pressure on the currency.
However, Central Bank Governor Ajith Nivard Cabraal said at a Reuters Global Market Forum on Monday that “there would be a greater tendency for the rupee to appreciate gently in light of the improvements in the external account”.
Overseas investors sold a net Rs. 4.23 billion ($32.4 million) worth of Government securities in the week ended 7 October, after selling Rs. 16.9 billion in the previous week, data from the Central Bank showed.
