Rupee falls to 3-week low on importer dollar demand
Tuesday, 22 July 2014 00:01
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Reuters: The rupee closed at a three-week low on Monday due to importer dollar demand, and dealers said the currency could face some downward pressure on a possible pickup in imports.
Dealers, however, said they did not see any impact on the rupee due to $307 million in outflows from Government securities a week earlier.
The rupee ended at 130.30/32 per dollar, its lowest since 30 June and weaker than Friday’s close of 130.28/30. Early last week, the rupee hit its highest in more than a year.
“There was some (import) demand, and we have seen some pickup in imports,” said a currency dealer asking not to be named.
Offshore investors sold Rs. 40 billion ($307 million) worth of Government securities last week, official data showed on Monday, but the Central Bank said this would not affect the rupee.
A currency dealer at a foreign bank, which usually deals with foreign trading in government securities, said the country could also see similar amount of inflows in the near future. He did not elaborate.
An official at the Central Bank’s International Operations Department said the Central Bank did not pump any dollars to accommodate the outflows and foreign investors would have found dollars from the market.
The Central Bank has said the rupee would have appreciated to around 125 rupees per dollar had it not intervened by absorbing $750 million from the domestic foreign exchange market this year through 14 July. Dealers had been expecting the rupee to appreciate due to lack of strong growth in imports and private sector credit, despite lower interest rates.
The Central Bank kept policy rates steady at multi-year lows for a sixth straight month last week, as expected, despite private sector credit growth slowing to a 4-1/2-year low.
The country’s trade deficit narrowed by 47.9% to $393.4 million in May from $754.9 million a year earlier, mainly due to lower imports, Central Bank data showed.
