CB Chief says rupee to remain stable this year

Thursday, 20 March 2014 00:44 - - {{hitsCtrl.values.hits}}

Reuters: The rupee will remain stable this year due to increasing export-related inflows and remittances into the country, Central Bank Governor Ajith Nivard Cabraal told Reuters on Wednesday. The rupee has been trading broadly steady since early December, with the Central Bank seen buying dollars to prevent any sharp appreciation. “Going forward, the same trend will continue. It is stable. It was never under pressure in our books. It is still not under pressure,” Cabraal told Reuters in an interview. Contrary to market expectations, the local currency has been firming ahead of the traditional New Year in April. Usually, it falls in March and early April due to higher import demand ahead of the Sinhala-Tamil New Year. However, dealers said they have yet to see higher import demand. “Now, additional exports and additional remittances have been taking that slack. The fact that there has been additional pressure in the past, it doesn’t mean the pressure has to remain now because we have seen the export figures. We have seen the remittances figures. So we are not surprised at all.” He also said the $67 billion economy has seen sufficient inflows which has very comfortably been taking care of outflows and helping the rupee remain steady. However, he did not rule out further Central Bank intervention to smoothen currency volatility. “In a thin market, a temporary surplus or temporary shortage can make a difference. We don’t want an unnecessary difference,” he said. Bankers and currency dealers, however, have told Reuters that soft importer dollar demand is mainly due to traders reducing imports this year amid weak demand.

Bourse edges up

Reuters: Shares edged higher in light trade on Wednesday, led by Nestle Lanka Plc and Hatton National Bank PLC (HNB) despite foreign outflows as an impending UN resolution on the country’s human rights record later this month dented sentiment. The main stock index ended up 0.07%, or 4.41 points, at 5,912.05. Foreign investors were sellers for a fourth straight session, recording net sales of Rs. 274.2 million worth of shares on Wednesday. Net outflows so far in 2014 stand at Rs. 4.16 billion, and clocked Rs. 22.88 billion in 2013. The day’s turnover was at Rs. 641 million ($ 4.91 million), well below this year’s daily average of about Rs. 907.4 million. Analysts said investor sentiment has been dented on concerns over the UN resolution, which could have an impact on the country’s economy. Many potential buyers in risky assets are staying on the sidelines awaiting clear direction. Nestle Lanka gained 1.99% to Rs. 1,950.20 while Hatton National Bank rose 3.27% to Rs. 157.90. Earlier this month, Sri Lanka questioned the independence of the human rights office of the United Nations after the United States asked it to investigate violations by the Sri Lanka Government related to the civil war. A vote on the resolution is scheduled for the last week of the session, starting on 24 March.