Rupee ends steady on dollar selling by State-run bank

Reuters: The rupee ended steady on Tuesday as a State-run bank, through which the Central Bank usually directs the market, sold dollars at 134.50 a day after it raised the local currency’s peg against the dollar for a second straight session.

Currency dealers said the pressure on the rupee eased due to some inward remittances, but they expect the Central Bank to let the rupee weaken due to importer dollar demand and a global trend of weakening currencies against the dollar.

“There were some inward remittances which eased the pressure today but the import demand was there,” said a currency dealer asking not to be named.

The rupee ended steady at 134.50 per dollar.

On Monday the State-run bank raised the rupee’s peg to the dollar by 20 cents, allowing the exchange rate to depreciate to 134.50.

The Central Bank left its key interest rates steady at record lows on Monday as expected, with inflation seen lower in the next few months, and said it was keen to avoid any excessive growth in credit. 

The bank said a rapid rise in imports of consumer durables, including motor vehicles, driven by credit available at low interest rates, among other things, had raised some concerns.

Analysts say the rupee may fall to 138 levels in the short term if the Central Bank allows it to depreciate without selling dollars through the State bank.