Saturday, 3 August 2013 00:37
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REUTERS: The rupee held near 10-month lows on Friday as importer dollar demand prevented the currency from recovering, while further downside was contained by a vigilant Central Bank eager to hold the greenback below Rs. 132, dealers said.
The rupee was quoted at Rs. 131.60/70 at 0510 GMT, staying steady from its Thursday’s close. Spot rupee dropped to Rs. 131.65/75 on 25 July, its lowest close in nearly 10 months.
“There is genuine importer dollar demand but rupee is trading flat,” said a currency dealer on condition of anonymity.
Some dealers said that they moved in to one-day forwards instead of spot trade following the Central Bank’s earlier direction to banks not to accept bids above Rs. 131.60 rupees. The one-day forward ended steady at Rs. 131.70/75, compared with Thursday’s close.
Dealers said the pressure on the currency remains as exporters took a wait-and-see approach, while remittances had also dried up, adding that downward pressure on the rupee could intensify if there were no dollar inflows in the short term.
The rupee has fallen around 4% since 7 June, with foreign investors pulling out of Sri Lanka’s Treasury bonds due to a rise in US Treasury yields on expectations that the Federal Reserve will soon begin to trim its stimulus program.
Dealers expect the rupee to move in a Rs. 131.50 to Rs. 132.00 range in the short term and continue to depreciate unless the Central Bank steps in with monetary tightening measures or significant dollar inflows come into the country.
The Central Bank last month said foreign inflows are expected into Government securities and the downward pressure on the currency would ease.
Sri Lanka’s economy is expected to grow at 7.5% this year, higher than the International Monetary Fund’s estimate of 6.3% and up from last year’s 6.4% growth. However, economists are more guarded about the outlook.
While private sector credit growth is slowly picking up, they say this isn’t sufficient to help the economy expand by 7.5% this year, despite the Central Bank’s easy monetary policy stance since December.
