Thursday, 1 August 2013 01:53
Reuters: The rupee ended flat near a 10-month low on Wednesday, but dealers expect downward pressure on the currency to persist due to importers’ demand for dollars.
The rupee closed at 131.65/70, steady from Tuesday’s close. It had closed at 131.65/75 on Thursday, its lowest close since Sept. 19.
Dealers said that downward pressure on the rupee could intensify if there were no dollar inflows.
“If the Central Bank tries to defend the currency, Sri Lankan exporters may lose competitiveness in the global markets with many countries including India having allowed depreciation,” one dealer said on condition of anonymity.
The rupee has fallen 4.1% since 7 June as foreign investors pulled out of Sri Lankan bonds and other emerging market assets due to a rise in US treasury yields on expectations of a scale back by the Federal Reserve of its stimulus program.
Dealers expect the rupee to move in a range of 131.50 to 132 in the short term and then will continue to depreciate unless the Central Bank steps in with monetary tightening measures or significant dollar inflows come into the country.
Meanwhile shares slipped to near one-week low on Wednesday as foreign investors sold in diversified stocks such as market heavy weight John Keells Holdings.
The main share index ended down 0.3%, or 18.26 points, at 6,037.22, its lowest close since 25 July.
John Keells Holdings Plc, which reported a 4% drop in June quarter profit on Friday, fell 1.40% to Rs. 260.40 a share. Foreign investors were net sellers of Rs. 461 million ($ 3.50 million) worth of shares, extending this week’s net outflow to Rs. 649 million. But they have been net buyers of Rs. 16.3 billion of shares so far this year. Analysts said despite the Central Bank’s easing of policy measures, concerns over the weakening rupee and high lending rates had dented sentiment, even as investors waited for direction.
The turnover was 906.3 million rupees, the highest since 27 June, but less than this year’s daily average of about Rs. 937 million.