CB intervenes, stabilises rupee after slide

Reuters: The Central Bank intervened in the currency market on Friday, selling dollars to stabilise the rupee after it had fallen to a more than six-month low.

“We have done a limited intervention, because I think there is some unnecessary speculation,” Central Bank Governor Ajith Nivard Cabraal told Reuters. “We have stabilised the market.”

The rupee had sunk to a 129.00/129.10 per dollar in early trade, its lowest since 4 December, as foreign investors sold bonds as part of a broader sell-off in emerging markets on fears that loose global monetary conditions were about to end.



The currency recovered some ground after intervention to close at 128.50/60, still 0.39% weaker than Thursday’s close of 128.00/10. It has fallen 1.6% this week.

Two dealers said the lowest deal was done at 129.05.

“The rupee is weakening on demand for dollars from foreigners who are selling rupee bonds,” one dealer said.

Regional markets have been rocked by uncertainty on whether the US Federal Reserve would dial back its massive stimulus later this year, forcing investors to cut back on assets seen as risky.

Dealers said one of two State-run banks, through which the Central Bank usually directs the market, sold dollars at 128.75 and the move calmed down the market.

The rupee has weakened 0.8% so far this year following a 10.7% depreciation in 2012 as the central bank opted for a flexible exchange rate regime in February 2012.

Sri Lanka’s main stock index edged up 0.19 points, or 11.52 points, to 6,219.39 in thin volume as local investors bought blue chips. On Thursday, the index hit its lowest close since 14 May.

The market witnessed a net foreign outflow of Rs. 81.9 million ($ 640,600). But foreigners have been net buyers of Rs. 16.03 billion worth shares so far this year. The day’s turnover was at Rs. 577.2 million, more than half of this year’s daily average of Rs. 1.03 billion.