Rupee ends firmer on dollar selling by state bank

Reuters: The rupee rose on Thursday, led by dollar selling by a state bank, a day after a top central bank official said proceeds from a $ 1.5 billion sovereign bond issue, which dealers say would lift the local currency, have flowed in.

Central Bank Deputy Governor Nandalal Weerasinghe said on Wednesday that the $ 1.5 billion raised from a bond issue last week had already come into the country and been absorbed into its foreign currency reserves.

Sri Lankan rupee one-week forwards, which have been acting as a proxy for the spot rupee, ended at 146.30/40 per dollar, compared with Wednesday’s close of 147.00/20.

“The demand (for dollars) was there. We observed that a state bank sold (the dollar) when the rupee traded at 147.40,” said a currency dealer, asking not to be named.

“It looked like state intervention to bring the rupee firmer.”

Central Bank officials were not available for comment.

Dealers also said the currency was under pressure due to dollar demand from importers.

Last week, Finance Minister Ravi Karunanayake said the rupee would “obviously appreciate” on inflows from Sri Lanka’s first sale of dual-tranche eurobonds.

The spot rupee was not traded on Thursday.

The spot-next, which are rupee forwards, settled three days after the spot rupee settlement, ended firmer, at 146.10/20 per dollar compared with Wednesday’s close of 146.90/147.10, on dollar selling by a state bank.

The spot rupee is tightly managed by the Central Bank and market participants use the forward market levels for guidance on the currency.