Rupee ends steady; importer dollar demand weighs on market

Reuters: The rupee ended steady on Thursday as greenback sales by banks and exporters offset importer demand for dollars, dealers said.

The spot rupee ended at 153.65/70 per dollar, hardly changed from Wednesday’s close of 153.65/75.

“There was (importer) demand in the morning. But in the latter part of the day, we saw some (dollar) conversions which helped the currency to end steady,” said a currency dealer, requesting anonymity.

The Central Bank has completely stopped defending the rupee unlike in the past, Deputy Governor Nandalal Weerasinghe told Reuters on Wednesday.

Weerasinghe in an interview with Reuters said the Central Bank has only been buying dollars since February, and not sold any at all.

He said the Central Bank does not see any pressure on the rupee and the currency is determined through market-driven demand and supply.

Weerasinghe added that if the monetary authority does not intervene and buy, probably the rupee will appreciate and the Central Bank is “buying and preventing certain appreciation”.

The market has priced in further depreciation due to the central bank’s no-intervention policy, dealers said. The rupee has dropped around 2.6% so far this year.

The spot rupee resumed trading on 19 June for the first time since 5 May, when the Central Bank fixed its reference rate at 152.50.

Dealers said they expected seasonal demand for dollars to pick up from August.

The Central Bank is compelled to buy dollars from the market to meet the reserve target set by the International Monetary Fund under a $ 1.5 billion, three-year loan program.

Bourse dips to near 1-week closing low

Reuters: Shares posted their lowest close in nearly one week in low trading on Thursday as local investors booked profits while foreign players bought into risky assets, limiting the decline.

The Colombo stock index ended 0.11% weaker at 6,738.42, declining for the third straight session.

“Local retail profit-taking brought the market down,” said Deputy CEO of Softlogic Stockbrokers Hussain Gani.

The market could see a rising trend if yields on fixed-income securities fall as expected by the Central Bank, said analysts.

The Central Bank expects a further fall in T-bill yields due to less pressure from government borrowing and a proposed new auction system, Deputy Governor Nandalal Weerasinghe said on Wednesday.

Foreign investors were net buyers of shares worth Rs. 166.3 million ($ 1.08 million), extending the year-to-date net foreign inflow to Rs. 23 billion worth of equities this year.

The day’s turnover was Rs. 489.4 million, compared with this year’s daily average of Rs. 906.6 million.

New foreign investors have been buying Sri Lankan shares since the Pakistani Bourse was upgraded as an emerging market from a frontier one, said analysts.

Brokers said domestic investors have been waiting for clarity on the proposed Inland Revenue legislation, which some companies expect would result in higher costs of production.

The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the Government to submit to parliament a new Inland Revenue Act.

Shares of conglomerate John Keells Holdings Plc closed 0.1% lower, Trans Asia Hotels Plc fell 5.5% and Commercial bank of Ceylon Plc, the country’s biggest listed lender, ended 0.3% weaker.