Rupee forwards end weaker on importer dollar demand

Reuters: Rupee forwards ended slightly weaker on Thursday on dollar demand from importers, with dealers saying the currency would face downward pressure due to seasonal demand from importers and after a downgrade by Fitch Ratings.

Fitch on Monday downgraded Sri Lanka’s sovereign rating to B-plus from BB-minus on increased refinancing risks, significant debt maturities, and weaker public finances. Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, however, said the downgrade will not impact the country’s borrowing. “The demand was there, but there are no aggressive sellers,” said a currency dealer asking not to be named. The downgrade will be of concern to international investors and market players, analysts said, adding it would push up the cost of government borrowings in the international market, putting pressure on the rupee. One-week rupee forwards, which act as a proxy for the spot currency, ended at 144.90/145.00 per dollar, weaker from Wednesday’s close of 144.75/85. The spot currency did not trade below 143.90, seen as the central bank’s desired level.

The spot rupee hit a record low of 144.65 when it resumed trading for the first time since 27 January on Friday. It did not trade for the past three sessions through Wednesday. The rupee is also under pressure due to seasonal import demand picking up ahead of the local New Year season starting in April and foreign outflows from Government securities.

Foreign investors sold Rs. 2.5 billion ($17.4 million) worth of government securities in the week ended 24 February, data from the Central Bank showed, taking the total offloaded since 30 December to Rs. 34.95 billion. Commercial banks parked Rs. 32.837 billion ($227.40 million) of surplus liquidity on Thursday, using the Central Bank’s deposit facility at 6.50%, official data showed.