Rupee ends weaker; spot trading resumes after 6 weeks

Reuters: The rupee ended weaker on Monday as dollar demand from importers weighed on the spot currency when it resumed trading after six weeks, dealers said.

The spot rupee LKR=LK ended at 153.18/23 after it began trading for the first time since 5 May when the Central Bank had fixed the spot reference rate at 152.50.

In the absence of active spot trade since then, rupee forwards SLKR have been active.

“The spot rupee started trading today after a long time, I think the Central Bank decided to let it go,” said a currency dealer, requesting anonymity.

Another dealer confirmed the spot trade, saying there was no intervention by the Central Bank.

The banking regulator is not expected to intervene in the market, dealers said, due to a mid-year foreign exchange reserves target and seasonal demand for dollars, expected from August.

Central Bank officials were not available for comment.

The Central Bank has set a target of $ 1.2 billion in direct market purchases of dollars to boost the island nation’s reserves this year, mainly to achieve a target set by the International Monetary Fund in return for a three-year $ 1.5 billion loan. 

Foreign investors bought a net Rs. 7.93 billion ($ 51.8 million) worth of government securities in the week ended 14 June. They have sold a net Rs. 32.03 billion worth of government bonds so far this year.