Rupee firmer on exporter dollar conversions

Thursday, 14 June 2012 00:50 - - {{hitsCtrl.values.hits}}

Reuters: The rupee recovered 0.5 per cent on Wednesday after hitting a record low the previous day as exporters sold dollars, traders said.

The rupee closed at 131.90/132.10 against the dollar from Tuesday’s close of 132.40/70. It hit all time low of 133.60 on Tuesday, surpassing the previous record of 133.00 reached on 25 April.

Analysts said that currency dealers are waiting to see the outcome of an International Monetary Fund mission meeting, now in its seventh day, with Government and Central Bank officials on the last tranche of a $ 2.6 billion loan.

“The rupee fell to 132.50/80 in the early trade, but exporter conversions (dollar sales) brought the currency down,” a currency dealer said on condition of anonymity.

The IMF, which has long pressed the Central Bank to allow flexibility in the rupee exchange rate, is expected to release the last tranche of the loan – about $ 420 million – if it is satisfied with that performance.

On Tuesday Central Bank Governor Ajith Nivard Cabraal said there was no one reason for the rupee’s fall and people were unnecessarily factoring in conditions that are not supported by macroeconomic fundamentals.

The Central Bank said on 31 May the rupee would recover to below 125 to the dollar. The currency has depreciated 16.5 per cent since 21 November, when the Government allowed a three per cent devaluation.

Sri Lankan stocks, meanwhile, rose with the main index gaining 0.77 per cent in thin trade to a near two-week high after the Central Bank held the key policy rates steady on Wednesday saying two increases since February were enough to moderate the expansion of both credit and the trade deficit.

But analysts said fears over economic worries including rupee volatility remained. Benchmark T-bill yields edged up at a Wednesday auction, raising investor concerns over the interest rate outlook.

Turnover was Rs. 284.8 million ($2.15 million), well below the daily average of Rs. 948 million this year.

Foreign investors were net sellers of Rs. 38.5 million worth of shares.