Rupee steady; seen falling

Tuesday, 28 October 2014 01:28 - - {{hitsCtrl.values.hits}}

Reuters: The rupee ended little changed on Monday as dollar selling by banks to cover short positions offset late importer demand for the greenback, dealers said. President Mahinda Rajapaksa, who is also the Finance Minister and is seeking an unprecedented third six-year term, unveiled the 2015 Budget on Friday that trims value-added taxes and cuts deficit, while providing a range of handouts, mainly for rural communities.

The spot currency ended at 130.85/90 per dollar compared with Friday’s close of 130.85/95. It was largely untraded last week on the Central Bank’s moral suasion. “Importer dollar demand was seen in the latter part of the day,” a currency dealer said. Dealers said the rupee will face downward pressure because lower rates and a stable exchange rate maintained by the Central Bank would encourage more imports in the medium term. “But if investments in industries take place after the tax incentives in the budget, it will help the currency to be stable or even to appreciate in the long term,” a trader said. Dealers said no moral suasion from the Central Bank was seen on Monday, but throughout last week it had persuaded some banks not to trade the spot and three-day forwards below certain levels to prevent sharp volatility. Nandalal Weerasinghe, a Central Bank Deputy Governor, said on 20 October the monetary authority would intervene to prevent short-term volatility in the rupee. Overseas investors have sold a net Rs. 30.9 billion ($236.2 million) worth of Government securities in the five weeks through 22 October, data from the Central Bank showed.

Secondary bond markets turn bearish on uncertainties By Wealth Trust Securities Secondary market bond yields were seen edging up marginally yesterday as sentiment turned bearish following certain uncertainties stemming out of the 2015 Budget, according to market sources. Activity centred on the 1 November 2015 maturity to the 1 July 2022 maturity as its yields were seen hitting intraday highs of 6.20% and 8.00% respectively against its days opening lows of 6.10% and 7.90%. In addition, a limited amount of activity was witnessed on the 15 May 2017 at 6.93% to 7.00%, the 1 April 2018 within the range of 7.25% to 7.30% and the 1 July 2019 within 7.30% to 7.40% as well as most market participants were seen on the sidelines. Overnight call money and repo rates remained steady yesterday to average 6.00% and 5.51% respectively as no auction under OMO (Open Market Operations) was conducted. The surplus liquidity stood at Rs. 17.99 b. Rupee appreciates marginally The dollar/rupee (USD/LKR) rate on spot contracts was seen actively traded yesterday to close the day at 130.70/90 on the back of inward remittances and export conversions. The total USD/LKR traded volume for 24 October was at $ 54.80 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.30; three months – 132.18; and six months – 133.18.