CB allows rupee to fall further

Thursday, 21 May 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The Central Bank allowed the rupee to fall by 0.15% on Wednesday by lowering the daily trading band for the second straight session, a move dealers said reflected lower domestic interest rates and a stronger dollar.

Dealers also said rupee forwards traded weaker due to importer dollar demand, while the Central Bank’s moral suasion prevented a sharp fall in the local currency.

“The Central Bank dropped the spot by 20 cents today. The pressure is there due to imports and nobody is selling dollars, but the Central Bank is preventing the fall though moral suasion,” said a currency dealer asking not to be named.

The Central Bank allowed a 20-cent, or 0.15%, fall in the spot rupee to 133.70 per dollar a day after permitting a 20 cent drop in the spot rupee to 133.50. But dealers said the spot did not trade on the day due to the regulator’s moral suasion, preventing deals below 133.70.

The Central Bank allowed the spot to appreciate 10 cents to 133.30 on Friday after allowing it to trade up 10 cents on 13 May. It permitted the rupee to depreciate 60 cents in three calibrated steps since 30 April through 12 May.

The Central Bank has been preventing high volatility and sharp movements in the currency through moral suasion since December. Central Bank officials were not available for comment.

Actively traded three-month forwards ended at 136.40/70 per dollar, down from Tuesday’s close of 136.30/50 as the Central Bank defended the two-month and one-month forwards. Two-month forwards were unchanged at 135.50/80 per dollar and one-month forwards were steady at 134.70/90, as the Central Bank prevented a sharp fall.