Wednesday, 28 May 2014 00:00
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Reuters: The rupee ended steady on Tuesday as late importer dollar demand offset early exporter greenback sales, with dealers expecting upward pressure on the currency to continue until demand for imports and credit pick up.
The rupee ended at 130.38/42 per dollar, unchanged from Monday’s close.
“This trend will continue. I don’t see any importer demand or credit growth picking up. So the rupee will be under appreciation pressure,” said a currency dealer.
Central Bank Governor Ajith Nivard Cabraal told Reuters on Friday that the currency was performing as the bank expected, and there was no pressure to appreciate or depreciate.
Dealers say the Central Bank had been preventing the rupee’s appreciation over the last few weeks with steady inflows amid lower demand for private sector credit and imports.
While maintaining the policy rate for the fourth straight month last week, the Central Bank introduced a new guarantee scheme for gold loans to boost credit growth that fell to a four-year low in March.
Despite multi-year low interest rates, data last week showed private sector credit grew at a four-year low of 4.3% in March from a year earlier. It hit a record 35.2% in March 2012.
The latest trade data on Monday showed imports have gained 8.2% in March, while exports hit a record high of $1.07 billion, helping to narrow the March trade deficit by 15.5% compared to a year ago.
Dealers expect the rupee to face upward pressure until credit growth and imports pick up.
Cabraal said on 19 May that private sector credit growth would pick up to around 15% by end-2014 and continue to improve through 2016.
