Rupee ends near record-low on importer dollar demand

Reuters: The rupee ended weaker on Thursday, near a record-low hit last week and falling for the fifth straight session, as demand for dollars by importers and sale of government securities by foreign funds weighed, dealers said.

The rupee is expected to fall further if the Central Bank fails to tighten interest rates or if the country does not see strong inflows soon, some dealers said.

The spot rupee ended at 138.95/139.10 per dollar compared to Wednesday’s close of 138.80/95. It hit a record-low of 139.00 per dollar on Friday.

“There were exporters selling around 139.00 level, but nobody is certain if the rupee will fall further. So, some exporters are not selling dollars in large volumes,” a currency dealer said asking not to be named.

Finance Minister Ravi Karunanayake said on Wednesday the rupee would be brought to an acceptable level before too long and interest rates would be pushed down.

The Central Bank rejected all bids at a weekly T-bill auction on Wednesday, in a sign that dealers were bidding at higher yields than the central bank’s expectation, traders said.

Results of last week’s t-bill auction showed yields gaining between 20 and 26 basis points, with benchmark 91-day yields hitting a more-than five-month high of 6.79%.

State-run banks, through which the central bank directs the market, did not sell dollars or give a reference rate for the currency as in the past, dealers said.

Dealers were reluctant to trade the currency below 139.00, which is seen as the Central Bank’s desired level.

The rupee fell 3% on Friday to a record-low of 139.00 per dollar after the Central Bank effectively floated the currency by ceasing to quote its own reference rate.