Rupee ends firmer amid moral suasion

Reuters: The rupee ended slightly firmer on Thursday as a state bank sold dollars amid moral suasion by the Central Bank after the local currency fell on importer greenback demand, dealers said.

Rupee forwards were active, with two-week forwards ending at 152.20/30 per dollar after it traded at 152.35 in intra-day trade. It closed at 152.35/50 on Wednesday.

“There was heavy moral suasion today. Some trades which traded above 152.35 were not allowed to take place,” said a currency dealer on condition of anonymity.

“The Central Bank was not giving an indication of a level, but they were saying the rates quoted were high.”

Dealers said one of the state banks, which is generally used by the Central Bank to direct the market, sold dollars up to 152.10 per dollar from 152.25, and eased the pressure on the currency.

Central Bank officials were not available for comment.

The International Monetary Fund on Wednesday urged the country’s Central Bank to rebuild foreign reserves while maintaining exchange rate flexibility.

Following its second review of a $ 1.5 billion three-year loan program, the IMF said it had discussed with Sri Lankan authorities the need to push forward with reforms due to an uncertain external environment.

Dealers expect the rupee to depreciate between 6% and 8% this year.

Analysts said inflow from up to $ 1.5 billion sovereign bond issue sooner than later could help ease some pressure on the currency.

Sources who know about the bond deal said top Central Bank officials have already left for the United States for a road show for the sovereign bond issue announced last month.

S&P Global Ratings said in a statement on Tuesday that it considers exchange rate stability will remain a major priority for Sri Lanka’s policymakers and its central bank, limiting monetary flexibility.

The Central Bank is struggling to maintain a flexible exchange rate in the face of heavy foreign outflows from government securities. The rupee has depreciated 1.2% so far this year, having lost 3.9% of its value against the dollar last year.

Foreign investors bought a net Rs. 701 million ($ 4.64 million) worth of government securities in the week ended 1 March, recording the first weekly net inflow for the year. They have sold a net Rs. 63.76 billion of such instruments so far this year.

Stock market dips for third straight session

Reuters: Shares fell for a third straight session on Thursday, posting their lowest close in a month, dragged down by diversified stocks such as John Keells Holdings Plc as investor sentiment continued to remain low on concerns about rising interest rates.

The Colombo stock index ended down 0.1% at 6,088.80, its lowest since 6 February. It shed 0.6% last week in its second straight weekly decline.

Foreign investors were net buyers for the seventh straight session on Thursday, purchasing shares worth Rs. 63.6 million ($ 420,495.87), and extending the year-to-date net foreign inflow to Rs. 1.95 billion worth of equities.

Turnover was Rs. 875.6 million, more than this year’s daily average turnover of Rs. 689.7 million.

“The market is mainly down because of John Keells. It is slowly coming down with rising rates and economic uncertainty,” said Dimantha Mathew, head of research at First Capital Equities Ltd.

“Foreigners seem to be the only buyers at the moment.”

Traders said there were concerns after the International Monetary Fund urged Sri Lanka’s Central Bank to be ready to tighten monetary policy if credit growth or inflation does not abate.

Shares of John Keells Holdings fell 1.06% while Commercial Bank of Ceylon Plc, the country’s biggest listed lender, declined 1.29% and Carson Cumberbatch Plc dropped 2.91%.

Sri Lanka Telecom Plc dropped 1.41% and Hatton National Bank Plc ended 1.16% weaker.

Yields on treasury bills have risen to a more than four-year high since October, while the Central Bank has kept key policy rates on hold.