Rupee steady at 2-month low amid downward pressure
Saturday, 22 February 2014 07:46
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Reuters:The rupee ended steady at its lowest in more than two months on Friday amid downward pressure from importer dollar demand, dealers said, a day after it breached a key barrier that the Central Bank had been defending since early December.
The rupee also came under pressure due to foreign outflow from equities and government securities.
The spot rupee ended at 130.95/131.00 per dollar, its lowest since Dec. 13, Reuters data showed.
The market expects slight depreciation in the local currency in the near future due to rising seasonal importer demand for dollars. It is usually under pressure in March and early April due ahead of the traditional New Year in mid-April.
“There is demand from importers as well due to security outflows. The two State banks were buying at 130.95 and selling to select banks at 130.95,” a currency dealer said.
On Thursday, the currency breached the 130.85 level, which dealers said the Central Bank has been defending for the past two months through buying and selling of dollars via two State banks.
Foreign investors had sold a net Rs. 2.32 billion worth of Government securities in the week ended 19 February, while they dumped Rs. 5.27 billion in stocks in the 11 straight sessions through Friday as some offshore funds exited the Bourse.
The market and analysts are concerned about the sustainability of the Central Bank’s policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low-interest-rate regime.
The Central Bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by “well-managed demand conditions and improved domestic supply”.
Currency dealers and traders said the Central Bank’s policies should work until the market sees a jump in private sector credit growth, which rose 7.5% year-on-year in December from 7.3% a month earlier.
The rupee has gained about 3.2% since it hit a record low of 135.20 on 28 August last year. It lost 2.5% in 2013.
