Rupee forwards rise on 10-year dollar bond launch

Friday, 29 May 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Rupee forwards ended firmer for the first time in nearly two weeks as exporters converted some dollars after the island nation launched a 10-year dollar bond in the international market, dealers said.

Sri Lanka has set a final guidance of 6.125-6.25% on the new 10-year dollar bond, better than the initial price talk of 6.375% area.

Actively traded three-month forwards ended at 137.75/85 per dollar, compared with Wednesday’s close of 139.00/10, gaining for the first time since 15 May.

The Central Bank also raised $ 338 million through dollar-dominated 13-month and 35-month bonds, which along with the exporter conversion of dollars helped to ease of the downward pressure on the rupee.

“This is a temporary relief,” a currency dealer said on condition of anonymity.

“But it may not help in the medium term because there is a lot of debt payment coming in before June. These inflows might help the central bank to defend the rupee without any depletion in its foreign currency reserves.”

Dealers said exporters may start selling dollars as inflows from the dollar bond would help boost the rupee currency.

Exporters have been holding dollars without converting as it has become cheaper for them to manage costs locally with rupee loans in a lower interest rate environment.

Dealers said the $ 75 billion economy may need sustainable dollar inflows to prevent the rupee from falling sharply and avert a potential balance of payments crisis.

The Central Bank on Tuesday allowed the spot rupee to fall 0.15%, or 20 cents, to 133.90, near its record low of 134.10, hit on 28 June 2012, Thomson Reuters data showed.

Currency dealers said with the three-month forwards trading around 137.75, the implied spot rupee should be around 136.00 per dollar. But the Central Bank has kept the spot at 133.90.

The Central Bank has allowed the spot to fall 0.75%, or by 1 rupee, since 30 April to account for broad gains in the dollar and rising credit demand in a low rate environment.