Rupee weaker on equity-related outflows, foreign bond sales
Wednesday, 1 October 2014 01:50
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Reuters: The rupee ended weaker on Tuesday due to equity-related outflows and foreign selling of Government securities, but moral suasion by the Central Bank capped any sharp fall in the local currency, dealers said.
The spot currency ended at 130.80 per dollar, down from Monday’s close of 130.50/55. However, spot trading was not active, dealers said.
“There was moral suasion by the central bank and nobody traded in the spot,” a currency dealer said, adding that the rupee forwards picked up in the absence of effective spot trade.
Three-day forwards or spot next closed at 130.75/95 per dollar, weaker from Monday’s close of 130.52/58, the dealers said.
Foreigners were net sellers of Lankan stocks on Monday, with outflows of Rs. 1.89 billion ($14.5 million).
Currency dealers expect the rupee to weaken on the back of sustained foreign selling in Government securities and higher imports in a low interest rates regime.
Some dealers said there was no dollar liquidity for imports.
Dealers said concerns over lower returns following the Central Bank’s decision to limit bank deposits under its repo window have prompted some foreign investors to gradually pare their stakes in government securities.
They cited lower optimism for the currency’s outlook after the Central Bank’s decision last week to limit commercial banks’ access to the standing deposit facility.
