Rupee steady ahead of policy rates announcement

(Reuters): The rupee ended steady in dull trade on Friday as a state-run bank sold dollars at 133.70, ahead of the Central Bank’s monetary policy rate decision, dealers said.

The Central Bank will announce key monetary policy rates for June on Monday and most analysts expect the central bank to keep the rates steady, a Reuters poll showed.

The state-owned bank, through which the central bank usually directs the market, sold dollars at 133.70, keeping the currency steady, dealers said.

Depreciation pressure on the currency has eased after Finance Minister Ravi Karunanayake said on Tuesday the spot would climb 3% to a two-year high of 130 per dollar in two weeks, dealers said.

Three-month forwards also ended steady at 135.25/35 per dollar compared with Thursday’s close.

“There was not much trade. The rupee traded at the same levels with the state bank selling at 133.70,” said a currency dealer asking not to be named.

The market expects the rupee to gain on expected inflows, but currency dealers said it was unlikely to appreciate as much as 3% within such a short period.

The Central Bank on Thursday raised $ 327 million from the sale of dollar-denominated development bonds after offering only $ 100 million.

The rupee has gained around 0.4% after hitting a record low of 134.20 on 18 June.