Rupee falls on importer dollar demand

Reuters: The rupee ended weaker on Thursday on importer dollar demand and fewer conversions of the US currency by exporters, dealers said.

The spot rupee ended at 153.75/80 per dollar, weaker from Wednesday’s close of 153.55/65.

“The demand was there, not only from state banks but also from the local banks. But it was mainly the state (bank) demand. That may be (due to) demand for month-end imports,” a currency dealer said, requesting anonymity. “There was not much (dollar) supply today. There were some bids in the morning, but with the rupee weakening, they were also being withdrawn, expecting further fall.”

Last week, Central Bank Governor Indrajith Coomaraswamy said the rupee was still “over-valued” and that the monetary authority was buying dollars to avoid any appreciation. The banking regulator is compelled to buy dollars from the market to meet a reserves target set by the International Monetary Fund (IMF) under a $ 1.5 billion, three-year loan program.

Analysts said a port deal approved by the cabinet on Tuesday has helped boost sentiment.

On Tuesday, Sri Lanka’s Cabinet cleared a revised agreement to lease its Chinese-built southern port of Hambantota, after terms of the first pact sparked widespread public anger in the island nation. The investment on the deal is expected to be around $ 1 billion.