Rupee hits record low ahead of rates decision

Reuters: The rupee hit new record low on Tuesday ahead of the Central Bank’s monetary policy decision as heavy importer demand could not be met and exporters stayed away in anticipation of further rupee depreciation.

The rupee closed at 123.30/70 a dollar, down from Monday’s close of 122.00/20. Dealers said that the highest trade was done at 123.70.

“Unless you see inflows, the rupee will further depreciate,” a currency dealer told Reuters on condition of anonymity. “There is speculation of inflows into the equity market, but we don’t know when they will come in.” The rupee has fallen 7.5 per cent since 9 February, when the Central Bank stopped defending it.

3A Reuters monthly forex poll has forecast the rupee to fall as far as 128.50 by the end of August.

The stock market meanwhile moved sideways in thin trade as a lingering pall of negative sentiment due to slower economic growth forecasts and fears of higher interest rates kept investors out.

The island nation’s main share index barely moved down to 5,423.26.

The Central Bank’s monthly monetary policy decision, due on Wednesday, also kept investors from taking positions, brokers said.

A Reuters poll of 17 analysts predicts the Central Bank will raise its policy rates by 50 basis points for a second month to 8% and 9.50% respectively.

The day’s turnover was Rs. 522.4 million ($ 4.29 million) well below last year’s daily average of 2.3 billion. Volume was 14.8 million. Last year’s daily average was a record 102.7 million.

Foreign investors bought shares worth Rs. 164.5 million, extending the offshore net foreign inflow to Rs. 3.06 billion so far this year, after a net outflow of Rs. 19.1 billion last year.

The Colombo Bourse is one of the worst performers this year among Asian markets, with a 10.7 per cent loss while the majority have been in positive territory.