Rupee forwards gain after CB chief comment on rates
Friday, 17 October 2014 00:42
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Reuters: Sri Lankan rupee forwards gained on Thursday due to dollar selling by exporters and banks after the Central Bank chief said a reversal of the falling trend in treasury bill yields was a signal where the authorities want rates to be.
Dealers said bond yields went up by 10-15 basis points after Reuters reported about Central Bank Governor Ajith Nivard Cabraal’s comments.
The spot currency was quoted at 130.70/75 per dollar, but it was not traded, dealers said. It had closed at 130.75/95 on Wednesday.
Three-day forwards, which were actively traded in the absence of spot, ended at 130.75/80 per dollar compared with Wednesday’s close of 130.90/131.00.
“The pressure on the rupee eased following the Central Bank’s comments with some banks selling dollars as the holding cost is high. The bond market also picked up,” said a currency dealer asking not to be named.
Dealers said the market was waiting for cues from the 2015 budget, scheduled for 24 October, and the monetary policy meeting on Friday, where the Central Bank is widely expected to leave key rates unchanged.
The rupee has been under pressure ever since the central bank announced moves to boost credit to the private sector in its September monetary policy review.
Cabraal, however, said at a Reuters Global Market Forum on Monday that “there would be a greater tendency for the rupee to appreciate gently in light of the improvements in the external account”.
The Central Bank in the last week of September limited the spot range to between 130.40 and 130.50 to prevent any sharp falls amid heavy selling in stocks and a pullback by foreign investors from Government securities.
Currency dealers said the rupee would trade steady until the year-end on Central Bank intervention and healthy foreign exchange reserves of more than $ 9 billion.
Overseas investors sold a net Rs. 4.23 b ($ 32.4 m) worth of government securities in the week ended 7 October, after selling Rs. 16.9 b in the previous week, data from the Central Bank showed.
