Rupee slips on importer dollar demand

Reuters: The rupee slipped on Thursday on late importer dollar demand and dealers expect that the currency may not hold at the current level of 125 a dollar due to rising oil bills and declining remittances.

The rupee edged down to 125.80/126 a dollar from Wednesday’s close of 125.45/50. Dealers said the currency was trading firmer and hit 125, but some last-hour importer dollar demand pulled it down.

Treasury Secretary P.B. Jayasundera on Wednesday said the rupee had now bottomed out and should not weaken again past 125 under the current economic conditions.

“Unless we see some inflows, it is difficult to hold the rupee at the 125 level with the rising dollar demand for oil bills and diminishing remittances after the festive season,” said a currency dealer on condition of anonymity.

The currency has risen 4.5 per cent since hitting a record low of 131.60 on 19 March, but overall has fallen 9.21 per cent since the Central Bank stopped defending it on 9 February.

After the markets closed, the Central Bank raised its policy rates as expected to curb credit growth, which it said appeared to be expanding at an “undesired pace”.

The stock market edge up 0.41 per cent or 22.34 points to 5,423.25 on Thursday on select buying in hotels and banks, with many investors staying on the sidelines.

The day’s turnover was Rs. 634.9 million ($ 5.1 million), well below this year’s daily average of 1.33 billion. Foreign investors were net buyers of 137.7 million, extending the net offshore buying to 21.1 billion so far in 2012.

The Colombo Bourse is one of the worst performers this year among Asian markets, with a 10.72 per cent loss.

Stock and foreign exchange markets will be closed on Friday to mark the Good Friday holiday. Normal trading will resume on Monday.