Rupee weaker on importer dollar demand; stocks down

Thursday, 29 May 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee traded weaker on Wednesday on importer dollar demand, but dealers expect the local currency to face upward pressure until demand for imports and credit pick up amid steady inflows. The rupee was at 130.42/45 per dollar at 0706 GMT, weaker than Tuesday’s close of 130.38/42. “There is importer (dollar) demand, probably to cover oil bills,” said a currency dealer. Central Bank Governor Ajith Nivard Cabraal told Reuters on Friday that the currency was performing as the bank expected, and there was no pressure to appreciate or depreciate. Dealers say the Central Bank had been preventing the rupee’s appreciation over the last few weeks with steady inflows amid lower demand for private sector credit and imports. While maintaining the policy rate for the fourth straight month last week, the Central Bank introduced a new guarantee scheme for gold loans to boost credit growth that fell to a four-year low in March. Despite multi-year low interest rates, data last week showed private sector credit grew at a four-year low of 4.3% in March from a year earlier. It hit a record 35.2% in March 2012. The latest trade data on Monday showed imports have gained 8.2% in March, while exports hit a record high of $ 1.07 billion, helping to narrow the March trade deficit by 15.5% compared to a year ago. Dealers expect the rupee to face upward pressure until credit growth and imports pick up. Cabraal said on 19 May that private sector credit growth would pick up to around 15% by end-2014 and continue to improve through 2016. Sri Lanka’s main stock index was down 0.12%, or 7.76 points, at 6,259.68 at 0708 GMT. Turnover stood at Rs. 287.4 million ($ 2.20 million), with 10.6 million shares changing hands.

CB bought over $ 400 m to prevent rupee gain this year

Reuters: The Central Bank has absorbed more than $ 400 million so far in 2014 to prevent a sharp gain in the rupee, a top Central Bank official said on Wednesday, amid steady inflows in the absence of strong importer dollar demand and lower credit growth. “We have been buying dollars and we have bought a little over $ 400 million so far this year,” Ananda Silva, one of the two Deputy Governors at the Central Bank, told Reuters. “The entire amount we bought last year was around $400 million.” Currency dealers have said the currency is under upward pressure due to steady inflows from worker remittances and exporter conversions of the US currency. They expect the rupee to face upward pressure until credit growth and imports pick up. Private sector credit grew 4.3% year-on-year in March, according to the latest Central Bank data, its slowest expansion since May 2010. That compared with growth of 4.4% in February and 10.9% a year ago. Private sector credit growth has been on a declining trend since March 2012 when it hit a record high of 35.2% before the Central Bank took several monetary policy measures to curb excess credit growth. Some banks and currency dealers say that despite multi-year low policy rates, they do not see much demand for imports and borrowing for investments, as consumer spending is declining due to higher taxes and lower disposable income.