Rupee ends steady ahead of long weekend

Reuters: The rupee ended steady on Thursday ahead of a long weekend as dollar sales by exporters offset demand for the US currency from banks to facilitate continuing exit of foreign investors from Government securities, dealers said.

Sri Lanka’s stock and foreign exchange markets will be closed on Friday for a Buddhist religious holiday.

Rupee forwards were active with two-week forwards closing steady at 151.20/25 per dollar.

Central Bank Governor Indrajit Coomaraswamy said on Wednesday that the bank was not planning to abruptly scrap its support for the rupee.

“It will be a gradual one. You have seen what has happened last month or two. That’s the pattern,” Coomaraswamy said.

The Central Bank has allowed the rupee to gradually depreciate since mid-December, revising its spot reference rate multiple times.

The rupee has weakened 0.6% so far this year and has been under pressure due to rising imports and net selling of Government securities by foreign investors, while the Central Bank said defending the currency with foreign exchange reserves did not “seem sensible”.

The Central Bank kept its key rates steady on Tuesday for a sixth straight month, but flagged possible “corrective measures” in the months ahead in a sign further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.

Foreign investors net sold Rs. 26.6 billion ($177.10 million) worth of Government securities in the four weeks to 1 February, according to the latest Central Bank data.