Rupee soars to over 10-month high as CB allows gain
Saturday, 10 May 2014 00:12
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Reuters: The rupee ended 0.06% firmer on Friday at its highest level in more than 10 months, as the Central Bank did not intervene and allowed the currency to appreciate amid steady inflows from remittances and exporter dollar conversions in the absence of credit demand and imports, dealers said.
The rupee closed at 130.42/44 per dollar, its highest close since 28 June, and firmer from Thursday’s close of 130.50/52. It has gained 0.14% in the last two sessions.
“We are giving effect to the present trend in a gradual manner,” Central Bank Governor Ajith Nivard Cabraal told Reuters.
Dealers said steady inflows from remittances and exporter conversions amid lack of importer dollar demand led to appreciation in the local currency.
They said there was no intervention from the Central Bank and one State bank bought dollars at 130.40 rupees on behalf of a State-run oil firm.
On Thursday, the rupee appreciated 0.08% as one of the two State banks, through which the Central Bank usually intervenes in the market, reduced its buying bid and allowed market forces to determine the level of the rupee.
Many dealers said the rupee would be under upward pressure until credit growth and imports reverse their trends.
Despite a multi-year low interest rate regime, latest data showed private sector credit grew 4.4% in February from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2% on year.
Dealers said lack of credit expansion and a contraction in imports could hit economic growth unless the Government props up expansion through infrastructure funding.
The Central Bank, in its monetary policy statement last month, however, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic growth.
The currency has hovered between 130.55 and 130.70 since 3 March through Thursday, Thomson Reuters data showed, with the central bank intervening to smoothen any sharp volatility.
