5-day rupee forwards end firmer on State bank dollar selling

Reuters: Five-day rupee forwards ended slightly firmer on Wednesday on selective dollar selling by a State bank despite demand for the greenback from importers, and as moral suasion by the Central Bank prevented a further fall, dealers said.

The five-day forwards, which are known as spot next and act as a proxy for the spot currency, ended at 146.30/60 per dollar compared with Tuesday’s close of 146.50/60.

“A State bank sold dollars to (facilitate) select trades up to 145.60 and Central Bank moral suasion was there because the pressure is there to depreciate,” said a currency dealer, asking not to be named.

Central Bank officials were not immediately available for comment.

Central Bank Governor Arjuna Mahendran said last week the monetary authority has been intervening to smoothen volatility in an illiquid market.

The spot rupee, which has barely seen any trading since 27 January, was not actively traded on Wednesday as well.

The rupee has been under pressure as foreign investors have sold Government securities amid the country’s economic woes, but they have net bought bonds worth Rs. 8.84 billion ($60.42 million) in the last three weeks, Central Bank data showed.

Sri Lanka borrowed 25% more in 2015 than it did in 2014, due to high cost of refinancing loans raised by the previous Government without Parliamentary approval.

But the country will stop excess Government borrowing in a bid to get out of a debt trap, Mahendran said last week.