CB defends Rupee

Saturday, 14 February 2015 01:37 -     - {{hitsCtrl.values.hits}}

Reuters: The rupee ended steady on Friday for the fifth straight session due to the Central Bank’s defence through moral suasion, while it was under downward pressure on importer dollar demand and lack of exporter dollar conversions, dealers said. The market expects downward pressure to persist until inflows come in after the new Government said it was looking to borrow up to $1.5 billion through sovereign bonds and $4 billion from the IMF in an effort to restructure expensive loans. The spot currency ended steady at 132.80/133.00 per dollar. The Central Bank has been defending the 132.80 level since 6 February after it lowered the spot rate to 132.80 from 132.20 amid depreciation pressure. “It is a dead market. No trade is happening due to the Central Bank’s restrictions,” a currency dealer said on condition of anonymity. “There may be movements if the Government could get inflows. But we don’t know how long we would have to wait.” Finance Minister Ravi Karunanayake on Monday said the rupee will be held steady at current levels and “there won’t be any devaluation at all”. Karunanayake told Reuters that Sri Lanka would sell up to $1.5 billion sovereign bonds in the international market soon and expects to tap the maximum possible borrowing from the International Monetary Fund (IMF). A top government official said on Thursday, on condition of anonymity, that the Government is looking to borrow $4 billion from the IMF at very cheap rates for balance of payments support. Already a Central Bank team led by Central Bank Governor Arjuna Mahendran is in Washington for discussions with IMF. Dealers said all the forwards ceased trading on Friday after the Central Bank narrowed the per day premium to two cents on Monday from five cents, dealers said. Some dealers said exporters might convert dollars, which might help ease the pressure if the Central Bank holds the rupee at these levels for the next few days.