Rupee slips on importer dollar demand

Reuters: The rupee edged lower on Monday as importers demanded dollars amid mild selling of the US currency by banks and exporters, dealers said.

The spot rupee ended at 153.73/80 per dollar, compared with Friday’s close of 153.60/70.

Dollar conversions by banks and exporters are not enough to meet the demand from importers, said a currency dealer, who declined to be identified.

“The market has priced in further depreciation of the rupee because of the Central Bank’s no-intervention policy. We also see some inflows from time to time, which prevents a sharp depreciation of the currency,” said the dealer.

The spot rupee resumed trading on June 19 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 rupee has been under pressure since early this year after the Central Bank stopped providing support for the currency at a time when the island faces a balance of payments crunch.

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