Rupee closes steady; inward remittances match thin dollar demand

Reuters: The rupee closed steady yesterday as thin dollar demand from importers and banks matched the selling of the US currency by exporters and inward remittances, dealers said.

A strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation, ratings agency Moody’s said on Wednesday.

Moody’s said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey, and Zambia.

The rupee ended at 158.20/35 per dollar, compared with Thursday’s close of 158.20/40.

The spot rupee hit an all-time low of 160.17 per dollar on 20 June and is down 3.1% so far this year.

“Today there were some inward remittances and importer demand was thin due to the month end,” a currency dealer said.

The downward pressure on the rupee has shown signs of easing after the nation received more than half a billion dollars from a Chinese port operator last week.

China Merchants Port Holdings made a $ 584 million payment as part of a $ 1.12 billion deal to operate the deep sea Hambantota port.

Dealers said they expect the rupee to trade in the 163-165 per dollar range by the end of the year.

The International Monetary Fund (IMF) said last week Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Head of the IMF mission to Sri Lanka Manuela Goretti told reporters last week that she expected the currency to remain under pressure.

Foreign investors sold government securities worth a net Rs. 2.9 billion ($ 18.26 million) in the week ended 20 June, bringing the outflows so far this year to Rs. 25.5 billion, Central Bank data showed.