Rupee weaker on imports; suspected CB move caps fall
Saturday, 11 October 2014 00:24
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Reuters: The rupee edged down on Friday due to importer dollar demand, while dealers said the Central Bank’s moral suasion capped the local currency at 130.40 and forwards picked up as a result.
The spot currency was quoted at 130.40/50 per dollar at 0859 GMT. Dealers said spot trading stopped when it fell to 130.40 as banks were reluctant to trade beyond this level due to moral suasion by the Central Bank.
The rupee closed 130.35/45 on Thursday. However, the three-day forwards or spot next was traded at 130.48/53 per dollar, down from Thursday’s close of 130.41/43, dealers said.
“There is huge pressure on the rupee, but due to moral suasion the spot did not move beyond 130.40 and forwards picked up,” said a currency dealer asking not to be named.
Central Bank officials were not available for comment immediately.
Treasury Secretary P.B. Jayasundera said on Thursday the rupee’s appreciation was unavoidable due to higher export earnings and inflows from services.
The Central Bank in the last week of September limited the spot currency range to between 130.40 and 130.50, to prevent any sharp falls amid heavy selling in stocks and pullback by foreign investors from Government securities.
Currency dealers expect the rupee to weaken due to sustained selling by foreign investors in government securities, which are already at multi-year lows, rising imports in a low interest-rate environment, and strengthening of the dollar globally.
Overseas investors sold a net Rs. 16.9 billion ($ 129.7 million) worth of Government securities in the week ended 1 October, after selling Rs. 5.07 billion worth of Government securities in the previous week, data from the Central Bank showed.
Sri Lanka’s stock index was down 0.94%, or 69.63 points, at 7,316.45 due to profit-taking.
Turnover was Rs. 2.81 million ($ 21.6 million), with 188.6 million shares changing hands.
