Rupee steady as State banks buy dollars ahead of holidays

Friday, 11 April 2014 00:00 -     - {{hitsCtrl.values.hits}}

REUTERS: The rupee closed unchanged at 130.59/61 per dollar as two State banks bought US currency to offset appreciation pressure resulting from greenback inflows from worker remittances and exporter dollar sales ahead of the festive season, dealers said. The two State banks, through which the Central Bank usually directs the market, bought dollars and an official at the Central Bank’s International Operations Department said the monetary authority had bought dollars in the last two days. “When we see excessive volatility due to high inflows, we will buy,” the official said. The market has seen a gradual increase in remittances sent by Sri Lankan expatriates overseas to their relatives, while exporters have been selling dollars to pay bonuses to their employees ahead of a festival next week, dealers said. Dealers do not expect any gains in the local currency from an expected $ 500 million inflow through a five-year sovereign bond which was sold at a yield of 5.125%. The head of the Central Bank said the entire proceeds of the bond would be absorbed into its foreign currency reserves. Central Bank Governor Ajith Nivard Cabraal said on Wednesday at a Reuters’ Global Market Forum that a sharp depreciation or appreciation was unlikely in the rupee “although a gentle trend could perhaps take place”. Before it appreciated on seasonal inflows, the local currency was under depreciation pressure until 2 April, but still held steady as dealers were reluctant to trade beyond 130.70 per dollar due to moral suasion by the Central Bank. Depreciation pressure has now eased due to inflows from remittances and exporter dollar conversion ahead of the Sinhala-Tamil New Year celebrated on 14 April. Both stock and currency markets will be closed for three days next week including Monday and Tuesday due to Sinhala-Tamil New Year followed by good Friday next week.