Rupee steady on CB intervention amid downward pressure

Reuters: The rupee ended steady on Monday as the Central Bank intervened in the currency market for a second day to help ease depreciation pressure amid importer demand for dollars, dealers said.

“There was intervention as we were giving away some dollars we have bought early June,” Central Bank Governor Ajith Nivard Cabraal told Reuters.

The rupee closed flat at 128.50/60 per dollar.

 Currency dealers said the lowest trade was done at 128.80 before one of the State-run banks, through which the Central Bank usually directs the market, sold dollars at 128.70.



“The bank sold at that price selectively and that helped the currency to recover,” a dealer said.

The rupee lost 1.6% last week. It had fallen to 129.00/129.10 per dollar in early trades on Friday, its lowest in six months, as foreign investors sold bonds as part of a broader sell-off in emerging markets on fears that loose global monetary conditions were about to end.

After market hours on Friday, Cabraal said the fall in the rupee was no cause for concern as foreign investors have been changing their positions rather than pulling out of the country’s bond market.

Regional markets have been rocked by uncertainty on whether the US Federal Reserve would dial back its massive stimulus later this year, forcing investors to cut back on assets seen as risky.

The rupee has weakened 0.8% so far this year following a 10.7% depreciation in 2012 as the Central Bank opted for a flexible exchange rate regime in February 2012.

Sri Lanka’s main stock index closed flat on Monday.

It closed 0.28 points weaker at 6,219.11, with the daily turnover slumping to a more than two-month low. On Thursday, the index had hit its lowest close since 14 May.

Though the market witnessed a net foreign inflow of Rs. 90.44 million ($ 703,500) on Monday, stockbrokers said sentiment had turned negative on concerns over the possible pull out of foreign funds from the island nation’s risky assets following regional peers.

The net foreign inflow so far this year has been Rs. 16.12 billion.

The day’s turnover was at Rs. 310.1 million, the lowest since 12 April and well below this year’s daily average of Rs. 1.02 billion.