Wednesday, 19 February 2014 00:49
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Reuters: The rupee fell on Tuesday due to dollar demand from importers andstock-related outflows, a day after the Central Bank kept its key policy rate steady at multi-year lows.
The spot rupee ended at 130.85/90 per dollar, weaker than Monday’s close of 130.83/87.
“The rupee is weaker on importer dollar demand and stock-related outflows,” said a currency dealer, asking not to be named.
The Central Bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by “well-managed demand conditions and improved domestic supply”.
The market is still concerned about the sustainability of the Central Bank’s policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low interest rate regime.
However, Central Bank Governor Ajith Nivard Cabraal said on Monday that “current conditions are sustainable,” for lower interest rates and a stable exchange rate, but did not elaborate.
Currency dealers and traders said the central bank’s policies should work until the market sees a jump in private sector credit growth, which has bottomed out to gain to 7.5% year-on-year in December from 7.3% a month earlier.
Dealers expect the Central Bank to keep the currency below 130.85 per dollar until April. Usually, the rupee is under pressure in March and early April due to seasonal imports ahead of the traditional New Year in mid-April.
The rupee has gained about 3.3% since it hit a record low of 135.20 on 28 August last year. It lost 2.5% in 2013.
