Rupee weakens on importer dollar demand

Wednesday, 18 July 2012 01:49 - - {{hitsCtrl.values.hits}}

Reuters: The rupee weakened on Tuesday on importer dollar demand, but prospects for a $ 1 billion 10-year sovereign bond to bring in greenbacks lent stability.

The rupee closed at 133.85/90 against the dollar, weaker from Monday’s close of 133.80/85.

“We saw some inflows of around $200 million through a foreign bank, but 90 percent of it was bought by oil importers,” said a currency dealer, asking not to be named.

However, analysts expect the rupee to appreciate in the near term from dollar inflows expected from the sovereign bond proceeds.

“We believe the rupee to gain at least to 130, provided the Central Bank will allow the inflow to be traded in the market,” a trader said on condition of anonymity.

The Colombo Stock Exchange main index meanwhile fell 0.55 per cent or 27.07 points to 4,853.03, its lowest since 13 June due to concerns over interest rate outlook.

Turnover was Rs. 225.1 million ($ 1.68 million), well below this year’s daily average of Rs. 926.

The Central Bank will hold its weekly auction for Treasury bills on Wednesday. The last auction saw 364-day Treasury bills rise to 13.10 per cent.

Some analysts expected the benchmark 364-day T-bill yield to reach as high as 14.5 per cent in the next two months, which may lead to a shift to fixed deposits from equities.