Rupee ends weaker on importer dollar demand

Reuters: The rupee ended weaker on Tuesday due to dollar demand from importers after the long weekend, dealers said, and as investors shrugged off a policy rate decision by the Central Bank, which held key rates steady as expected.

The Central Bank kept its benchmark interest rates steady on Friday, saying the current monetary policy was appropriate as it expected the economy to recover in the second half of the year.

The spot rupee, which has been trading for the sixth straight session after being inactive for six weeks, ended at 153.32/40 per dollar, compared with Friday’s close of 153.22/30.

The markets were closed on Monday for the Id-ul-Fitr holiday.

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.

“The importer (dollar) demand was there today after the long weekend,” said a currency dealer, requesting anonymity.

Dealers said they expect seasonal demand for the dollar to pick up from August.

The rupee has been under pressure after the central bank said it would allow gradual depreciation of the currency and set a target of $ 1.2 billion in direct market purchases of dollars to boost the island nation’s reserves this year, mainly to meet a target set by the International Monetary Fund for a three-year $ 1.5 billion loan.

“If, as we expect, the Fed tightens monetary policy more aggressively than the market expects over the coming months, there is a risk that this could lead to further falls in the (rupee) currency against the US dollar,” Krystal Tan, Asia economist at Capital Economics, said in a research note.