Rupee ends higher on bank dollar sales, forward booking

Reuters - The Sri Lankan rupee ended higher on Thursday, as banks and exporter dollar sales and forward booking outpaced mild importer demand for the greenback in the absence of state bank dollar buying, dealers said.

The spot rupee ended at 153.10/20 per dollar, compared with Wednesday’s close of 153.22/28.

“We see considerable exporter dollar sales and forward booking,” a currency dealer said, requesting anonymity.

“The market believes that the rupee should gradually depreciate though the depreciation so far is much less than expected. Exporters have been reluctant to sell dollars on speculation that the rupee will fall below 160 per dollar. But now we see exporter selling coming in,” he added.

Dealers said state banks bought dollars at 153.10 rupees per dollar.

Dealers said the market is expecting some foreign inflows after Reserve Bank of India cut its main policy rate last week.

Analysts said the market shrugged off last week’s policy decision by the central bank as it was widely expected.

The central bank held its policy rates steady last week 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 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 programme.