Rupee at 2 year high on CB band cut, exporter sales

Friday, 10 December 2010 00:01 - - {{hitsCtrl.values.hits}}

Stock market losing more steam; extends four-day drop

COLOMBO, (Reuters) - Sri Lanka’s rupee currency hit a new two-year high on Thursday as the central bank reduced the lower end of its trading band against the dollar, while exporter selling ahead of the year-end holidays also helped.

The Sri Lankan central bank indicates a trading band through quotes offered by two state-owned banks. It dropped the lower end of the band to 110.90 rupees per dollar from 111 on Wednesday and retained the upper end at 111.40 widening the range to 50 cents from 40 cents, currency dealers told Reuters.

“The central bank’s trading band widened to 50 cents by reducing the lower band by 10 cents” to increase flexibility and give banks a wider trading range, said a dealer, who asked that he not be named.

The rupee closed firmer at 110.97/111.02 a dollar, its highest since Dec. 11, 2008, from Wednesday’s 111.00/10. It has risen 3 percent in 2010. Stocks fell, extending a four-day drop, weighed by credit shortage and lack of buying interest as the year draws to a close, traders said.

The main share index fell 8.54 points or 0.13 percent to 6,445.77, its lowest close since Nov. 30 after falling in last four straight sessions. Asia’s best performer in 2010 has gained 90.4 percent, ahead of second-ranked Indonesia’s 49.4 percent.

The country’s Securities & Exchange Commission has been asking stockbrokers to phase out credit transaction forcing investors to sell shares to pay their margin loans. Although the deadline for the phase out was extended by six months from the previous date of Jan.1, traders said they have reduced their credit transactions sharply, hurting volumes.

The day’s turnover was 1.9 billion rupees ($17.1 million), over three times the 2009 daily average of 593.6 million rupees. Foreign investors have sold a net 25 billion rupees in shares this year and on Thursday sold a net 381.4 million.

The bourse is trading at a forward price-to-earnings ratio of 20.1, the highest in Asia, compared with all-Asia’s 13.2 and global emerging markets’ 12.3, Thomson Reuters StarMine data showed. The CSE’s 14-day relative strength index is at 45.5, between the lower and upper neutral limit of 30 and 70.

Trading volume rose to 149.6 million shares on Thursday, against average volume of 68.7 million and 52.8 million in the past five and 30 days, respectively. The 90-day average volume is 70.4 million.