Rupee edges up after State-run bank cuts dollar peg

Thursday, 27 August 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee ended a tad firmer on Wednesday as a State-run bank, through which the Central Bank usually directs the market, cut the currency’s peg against the dollar by 10 cents to 134.15, a day after raising it for the third time in a row.

Currency dealers said importer dollar demand eased in the latter part of the session and some inflows from inward remittances also helped to ease the pressure on the currency.

The rupee ended at 134.15 per dollar, 0.07% firmer from Tuesday’s close of 134.25.

“The import pressure eased in the latter part of the day with the Central Bank giving dollars. There were some inward remittances with month-end salaries,” said a currency dealer on condition of anonymity.

Currency dealers expect the central bank, which has so far this year directed the market through the State-run bank, to let the currency remain weaker after last week’s parliament elections, due to importer dollar demand and the global trend of weakening currencies against the dollar.

They said defending the rupee could have a negative impact on the country’s international trade due to an over-valued currency.

Analysts said the rupee may fall to 137 levels in the short term if the Central Bank allows it to depreciate, in line with the weakening seen in other global currencies.

Currency dealers said the rupee is under pressure to depreciate with heavy importer dollar demand and reluctant exporter greenback sales.

Central Bank officials were not immediately available for comment.

The currency has fallen 0.48% since 5 August as the State-owned bank raised the currency’s peg against the dollar by 75 cents on six occasions through Tuesday, allowing the exchange rate to fall.