Rupee steady; importer dollar demand offsets exporter sales

Reuters: The rupee ended steady on Monday as importer dollar demand offset greenback sales by exporters, while investors assessed the extent of damage to the economy from the recent floods and landslides, dealers said.

The country’s main agricultural crops - tea and rubber - were hit by the worst torrential rains in 14 years.

Damage to agricultural exports would put pressure on the rupee, currency dealers said. Analysts said the hospitality and manufacturing sectors are likely to be the worst hit.

However, dealers said there was some optimism over expected inflows in the form of international assistance, which could help offset potential downward pressure on the local currency.

Rupee forwards were active on Monday, with spot-next forwards ending at 152.85/95 per dollar, unchanged from Friday’s close.

“The (importer dollar) demand was there after the weekend and ahead of a holiday in the middle of the week,” said a currency dealer.“There was exporter (dollar) sales and inward remittances too.”

Dealers said the aid inflows could help the rupee, but the Central Bank will have to tighten interest rates to curb unnecessary credit growth and inflationary pressure.

The floods could hurt overall economic growth and also widen the Government’s budget deficit with high infrastructure spending, dealers said.The rupee has been under pressure after the Central Bank Governor said on 18 May the bank would allow gradual depreciation of the currency.The spot rupee did not trade on Monday.

The central bank fixed the spot rupee reference rate at 152.50 on 5 May.

Foreign investors bought a net Rs. 740 million ($ 4.86 million) worth of government securities in the week ended 31 May. They have sold a net Rs. 41.33 billion worth of securities so far this year.

Stock market falls on profit-taking in banks

Reuters: Shares fell in thin trade on Monday on profit-booking in banking stocks while investors assessed the impact of recent deadly floods on exchange rate and inflation.

Analysts said it is too early to evaluate the real impact of the floods and landslides caused by the worst torrential rains in 14 years, killing over 200 people and devastating crops.The Colombo stock index ended 0.19% weaker at 6,676.32, its lowest close since 31 May. The Bourse fell 0.13% last week, its second straight weekly drop.

Turnover was Rs. 395.4 million ($ 2.59 million), less than half of this year’s daily average of Rs. 893.8 million.

Inflation could rise in the short term, especially due to crop damages and difficulties in distributing fresh food produce and staple food items, analysts said.

“It was a quiet market today. We expect the market to consolidate at these levels until we see some strong foreign buying coming into the market,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Foreign investors were net buyers of 101.8 million rupees worth of shares, extending the year-to-date net foreign inflow to Rs. 19.65 billion.

Shares of Nanda Investment Plc fell 16.46%, Lanka ORIX Leasing Co Plc declined 1.86%, Ceylon Cold Stores Plc dropped 1.48% and Sri Lanka Telecom Plc shed 1.52%.