Rupee forwards steady on moral suasion

Wednesday, 22 April 2015 00:02 - - {{hitsCtrl.values.hits}}

Reuters: Rupee forwards ended steady on Tuesday on moral suasion by the Central Bank amid importer dollar demand, while the local currency is expected to be under pressure until the middle of this year due to lower interest rates. Actively traded two-week forwards ended at 133.90/134.00 per dollar, compared with Monday’s close of 133.90/95, while one-week forwards were steady at 133.

60/70. “Import bills are there and there is downward pressure. The central bank’s moral suasion is preventing two-week forwards from trading below 133.90 per dollar,” said a currency dealer asking not to be named. “With the present political uncertainty, the confidence factor is eroding day by day which could put pressure on the exchange rate.” Dealers said the rupee would be under pressure through May and June as credit growth is expected to hit a peak in a lower interest rate environment. The Central Bank cut key rates on Wednesday in a surprise move to record lows and said in its monetary policy statement that the outlook on balance of payments remains favourable in 2015. Finance Minister Ravi Karunanayake on Wednesday said there were sufficient funds to defend the currency and a lot of foreign inflows are expected. The Central Bank through moral suasion prevented the spot rupee from dropping below 132.90/133.20, a limit it set in February. Central Bank officials were not immediately available for comment. Investors have been cautious due to political uncertainty as Prime Minister Ranil Wickremesinghe’s party did not have a majority in Parliament. President Maithripala Sirisena had promised to dissolve Parliament after 23 April and call for a parliamentary election.