Rupee at record low after State bank raises dollar peg

Friday, 4 September 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee closed at an all-time low on Thursday as a State-run bank, through which the Central Bank usually directs the market, raised the currency’s peg against the dollar by 25 cents to allow the exchange rate to depreciate.

The rupee ended 0.19% weaker at 134.75 per dollar compared with Wednesday’s close of 134.50, the previous all-time low.

“There was huge pressure on the rupee due to heavy importer dollar demand,” a dealer said on condition of anonymity.

“Exporters are not converting because holding in dollars for them is cheaper in a lower interest rate regime.”

In the backdrop of increasing pressure on the exchange rate, the Government’s debt office on Wednesday allowed yields on short-term Government securities to rise 20 to 26 basis points at a weekly t-bill auction.

The benchmark 91-day t-bill yield on Wednesday hit a more than five-month high of 6.79%.

The market had expected the Central Bank to allow the rupee to depreciate further, in line with other regional currencies that have declined against the dollar.

The State-run bank had raised the currency’s peg against the dollar by 35 cents in two straight sessions through Monday, allowing the exchange rate to depreciate to 134.50.

Analysts said the rupee may fall to 138 levels in the short term if the Central Bank stops intervening via the State bank.

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.