Saturday, 1 November 2014 00:48
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Reuters: Rupee forwards ended steady on Friday as importer dollar demand was offset by inflows from inward remittances, but traders said the local currency is under downward pressure due to rising imports in a stable exchange rate regime.
Dealers said moral suasion by the Central Bank prevented the local currency from falling below 131.00 and compelled some exporters to sell dollars.
The spot currency was not quoted on Friday due to the moral suasion, dealers said. It closed at 130.85/90 per dollar on Thursday.
Three-day forwards, or spot next, was actively traded in the absence of spot trade. The spot next ended at 130.92/131.00 per dollar compared with Thursday’s close of 130.90/131.00.
“There was heavy importer dollar demand, but in the latter part of the day we have seen some inward remittances which eased the pressure,” a currency dealer said.
Dealers said the spot next was not allowed to trade below 131.00 in early trade.
Dealers said the market expects the local currency to face more pressure due to rising imports and lower rates. The Central Bank’s stable exchange rate policy would encourage more imports in the medium term, they said.
The Central Bank has been preventing any spot trade below 130.85 this week through moral suasion, dealers said.
Central Bank Governor Ajith Nivard Cabraal said during a Reuters post-Budget forum in Colombo on Monday that the trend was for an appreciating rupee. He did not elaborate.
The Central Bank last week dissuaded some banks from trading in the spot and three-day currency forwards below a pre-determined level to prevent volatility.
Overseas investors sold a net Rs. 36.2 billion ($ 276.9 million) worth of Government securities in the six weeks through 29 October, data from the Central Bank showed.
