Rupee ends slightly weaker on importer dollar demand

Reuters: The rupee ended slightly weaker on Wednesday, as late importer dollar demand surpassed the greenback selling by banks, while the market expected the local currency to appreciate due to inflows, dealers said.

The spot rupee ended at 153.22/28 per dollar compared with Tuesday’s close of 153.20/30.

“Importer (dollar) demand was there. The state banks bought dollars which weakened the rupee,” a currency dealer said, requesting anonymity. Another dealer said the market is expecting some foreign inflows after Reserve Bank of India last week cut its main policy rate.

Analysts said the market shrugged off Thursday’s policy decision by the Central Bank as it was widely expected.

The Central Bank held its policy rates steady last week and said tightening measures are helping cool inflation and credit growth, signalling receding concerns about price pressure as it focuses on supporting an economy hit by extreme weather. Central Bank Governor Indrajit Coomaraswamy said the bank had expected to purchase $ 1.2 billion directly from the market between March and December, and it had already bought around $ 1 billion. Coomaraswamy had earlier 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.