Rupee ends slightly weaker on late importer dollar demand

Reuters: The rupee ended weaker in dull trade on Wednesday as late importer dollar demand outpaced the early gains from inward remittances and exporter greenback sales ahead of the festival season, dealers said.

The Central Bank cut the spot rupee reference rate by 10 cents to 151.60, dealers said.

Rupee forwards were active, with two-week forwards ending at 152.50/65 per dollar, from Tuesday’s close of 152.40/50.

“There was some late importer dollar demand. The market was dull and the pressure on the rupee seem to be still prevailing despite rate hike,” said a currency dealer who did not wish to be named. The rupee has been under pressure due to dollar demand to meet increased seasonal imports ahead of the traditional New Year that is celebrated on 13-14 April, dealers said.

The Central Bank raised interest rates by 25 basis points on 24 March, for the first time in eight months, saying tighter policy was a precaution against a build-up of inflationary pressures.

The rate hike was expected to help stabilise the rupee as rising imports and outflows due to rupee bond sales by foreign investors have exerted pressure on the currency, analysts said.

Foreign investors net sold government securities worth Rs. 950 million ($ 6.26 million) in the week ended 29 March. They have net sold Rs. 64.2 billion of such instruments so far this year.