Tuesday, 11 February 2014 00:01
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Reuters: The rupee ended weaker on Monday on foreign equity outflow in the absence of intervention by State banks, and dealers expect the currency to ease further on lower interest rates from next month.
The spot rupee ended at 130.75/80 per dollar, weaker than Friday’s close of 130.60/70.
“There were outflows from equity selling. We did not see any intervention from State banks,” a currency dealer said.
The market saw a net foreign outflow of Rs. 3.72 billion ($ 28.45 million) in the three sessions through Monday as offshore funds continued to dump risky assets as part of a selloff in emerging markets.
Dealers, however, said they expect a mild volatility in the currency in the short term before falling on seasonal importer dollar demand in March.
Five dealers Reuters spoke to said the market is yet to see the impact of inflows from the foreign buying in government securities as reported by the Central Bank last week.
Foreign investors bought Rs. 15.57 billion ($119.17 million) worth of Government securities from 29 January to 5 February, after selling a net Rs. 951 million worth the week before, the latest Central Bank data showed.
The new buying increased foreign holdings of Government securities in the week ended 5 February by 3.2% to Rs. 497.46 billion.
Dealers expect the Central Bank to keep the currency between 130.65 and 130.85 until depreciation pressure comes in.
Dealers still see downward pressure on the currency because of the Federal Reserve’s decision to cut stimulus further and a US statement on bringing in another UN resolution against Sri Lanka could also weigh on the rupee.
Central Bank Governor Ajith Nivard Cabraal said on 27 January that Sri Lanka should not experience any major capital outflows or market volatility due to the Fed stimulus cut.
The rupee has gained about 3.4% since it hit a record low of 135.20 on 28 August. It lost 2.5% in 2013. ($1 = 130.7500 Sri Lanka rupees)
