Rupee falls on importer dollar demand

Reuters: The rupee fell on Wednesday as demand for the US dollar from banks surpassed mild inward remittances, traders said.

The rupee, which traded at 159.94 per dollar intraday, ended at 159.90/160.00 per dollar, compared with Tuesday’s close of 159.75/85. It hit a record low of 160.17 on 20 June and has declined 4.1% so far this year.

“Today there was demand throughout the day. State banks were also on the buying side and there were no sellers today,” said a currency dealer, asking not to be named.

“There was some demand for equity outflow also.”

On Friday, the Central Bank left its key policy rates unchanged, saying the decision backed its goals for stabilising inflation and fostering sustainable economic growth.

Central Bank Governor Indrajit Coomaraswamy told reporters that several emerging market currencies had depreciated over 4%, more than the rupee, adding, “If we reduce rates that would put further pressure on the exchange rate.”

Sri Lanka last week raised import duties on small hybrid cars by more than 50% to boost revenue and curb a sharp fall in the rupee.

The Finance Ministry imposed a minimum duty of Rs. 1.25 million on any hybrid car with an engine capacity of less than 1,000 cubic centimetres to discourage imports which have put pressure on the rupee. Coomaraswamy had said earlier that the rupee’s decline was driven mainly by factors outside Sri Lanka.

Foreign investors sold Government securities worth a net Rs. 259.7 million ($1.63 million) in the week ended 1 August, bringing the outflow so far this year to Rs. 36.5 billion, Central Bank data showed.