Rupee ends firmer on bank dollar sales

Reuters: The rupee ended firmer on Tuesday, as dollar selling by banks surpassed mild importer demand for the greenback in dull trade after the long weekend, dealers said.

The spot rupee traded at 153.20/30 per dollar, compared with Friday’s close of 153.35/45.

Both stock and foreign exchange markets were closed on Monday for a Buddhist religious holiday.

“Today it was a very dull day. Nothing major happened, but there was some dollar selling by a foreign bank and some inward remittances after the long weekend. The trading was very dull and there was not much of importer demand,” a currency dealer said, requesting anonymity.

Analysts said the market shrugged off Thursday’s policy decision by the Central Bank as it was widely expected.

The Central Bank held its policy rates steady on Thursday and said tightening measures are helping cool inflation and credit growth, signalling receding concerns about price pressure as it focuses on supporting an economy hit by extreme weather.

Central Bank Governor Indrajit Coomaraswamy on Thursday said the bank had expected to purchase 1.2 billion dollars directly from the market between March and December, and it had already bought around $1 billion.

Coomaraswamy had earlier said the rupee was still “over-valued”, and that the monetary authority was buying dollars to avoid any appreciation.

The banking regulator is compelled to buy dollars from the market to meet a reserves target set by the International Monetary Fund (IMF) under a $1.5 billion, three-year loan program.