Rupee slips on importer dollar demand; shares down

Tuesday, 1 May 2012 02:23 - - {{hitsCtrl.values.hits}}

Reuters: The rupee ended 0.2% down on Monday on as importers bought dollars and the market ignored a threat by the treasury secretary to resume intervention if the rupee drops beyond “tolerable” levels due to speculation.

Treasury Secretary P.B. Jayasundera told reporters on Monday that the currency should stabilise below 125 rupees and there was no fundamental reason for it to be beyond that level.

The rupee ended at 130.00/130.40 against the dollar, weaker from Friday’s close of 129.90/130.

Dealers said a State bank, through which the Central Bank usually directs the market, sold about $ 6 million to support the rupee though that was not adequate to stop the fall.

The Central Bank said it would allow part of a $ 500 million bond raised by the state-owned Bank of Ceylon to be sold in the market and would use the rest to build up reserves.

“We will allow a part to the market,” Central Bank Governor Ajith Nivard Cabraal told Reuters without elaborating on the amount he intended to allow into the market.

The Central Bank had expected the bond proceeds to support the rupee, but traders were less optimistic.

The rupee has recovered 2.4% since it hit an all-time low of 133.50 on Wednesday. But it has depreciated 12.2% since the Central Bank stopped intervening to defend a specific price on 9 February and 15.2% from 19 November, when the Government allowed a 3% devaluation.

The stock market meanwhile edged down 0.39%, or 21.32 points, to 5,419.20 with investors worried about the rupee’s fall, rising interest rates and slowing economic growth.

The day’s turnover was Rs. 631.1 million ($ 4.85 million), well below this year’s daily average of Rs. 1.2 billion.

The market saw a foreign outflow of Rs. 71.8 million. Foreign investors have been net buyers of Rs. 21.2 billion this year.

The Colombo Bourse is one of the worst performing Asian markets this year, losing 10.8%.

Stock and foreign exchange markets will be closed on Tuesday for a public holiday.