Rupee near 1-year high; State banks lower dollar-buying rate
Friday, 6 June 2014 00:51
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REUTERS: The rupee ended near a one-year high on Thursday as exporters and banks sold dollars, while state banks lowered the greenback buying rate by 2 cents.
Dealers said the two state banks, through which the Central Bank intervenes to direct the market, bought dollars at Rs. 130.28, 2 cents below the previous day, to prevent sharp volatility in the currency.
The rupee ended at Rs. 130.28/30 per dollar, its highest close since 26 June, 2013 and firmer from Wednesday’s close of Rs. 130.28/33.
“We can’t see much of imports bills, oil imports also dried down and there are continued inflows,” said a currency dealer asking not to be named.
“The Central Bank further lowered the buying rate by two cents to Rs. 130.28 from yesterday’s level of Rs. 130.30.”
Two other dealers confirmed the move.
Central Bank officials were not immediately available for comment.
On Monday, the Central Bank had said dollar buying by state banks was for oil imports.
An official at the Central Bank’s International Operations Department told Reuters on Monday the bank had been buying only excess dollars.
Central Bank Governor Ajith Nivard Cabraal told Reuters on Friday that the bank would keep intervening in currency markets to prevent a rapid rise in the rupee.
He said the country would probably see a tendency for the rupee to appreciate in the next few years, and the bank was keen that whatever movement takes place happens in a “fairly gradual” manner.
Ananda Silva, one of the two Deputy Governors at the Central Bank, told Reuters last week that the monetary authority has absorbed over $ 400 million as of 27 May this year to prevent a sharp gain in the rupee.
Dealers say the Central Bank’s intervention has prevented gains in the currency and expect it to face upward pressure until credit growth and imports pick up.
Despite multi-year low interest rates, data on 5 May showed private sector credit grew at a four-year low of 4.3% in March from a year earlier. It hit a record 35.2% in March 2012.
