Rupee slips on dollar buying by banks ahead of rate call

Reuters: The rupee closed slightly weaker on Monday due to dollar demand from importers and banks as foreign investors continued to sell government securities, dealers said.

Rupee forwards were active with two-week forwards ending at 151.18/25, compared with Friday’s close of 151.15/20.

“Import demand was there, we can see the pressure (to depreciate) with festive demand building up,” said a currency dealer requesting anonymity.

Sri Lanka’s Central Bank is scheduled to hold its first monetary policy review of 2017 on Tuesday.

The Central Bank could raise its key policy rates in coming months if it skips a chance to tighten this week, a Reuters poll showed, underlining renewed pressure on the rupee after the Federal Reserve’s rate hike last month.

The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, while the Central Bank has said defending the currency with foreign exchange reserves “does not seem sensible”.

The Central Bank revised the spot rupee reference rate to a record low of 150.50 from 150.25 last week.

Foreign investors net sold Rs. 26.6 billion ($ 177.10 million) worth of government securities in the four weeks to 1 February, according to latest Central Bank data.