Rupee down as IMF team visits; shares gain

Tuesday, 12 June 2012 01:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee fell 1.1 percent on Monday on moderate importer dollar demand and in the absence of State bank intervention as an International Monetary Fund (IMF) mission met authorities to discuss the last tranche of a $2.6 billion loan.

The rupee lost 1.14 per cent, closing at 131.80/132.00 to the dollar compared with Friday’s close of 130.35/45, despite Central Bank assurances that the currency would strengthen to 125.

The visiting IMF review mission held talks with top Central Bank and Government officials on the $ 59 billion economy’s performance, two sources close to the discussions said.

The IMF is expected to release the last tranche of the loan, of about $ 420 million, by July, if it satisfied with Sri Lanka’s economic performance since February.

Authorities have since February introduced sweeping policy changes including a flexible exchange rate and tight monetary policy measures to prevent a balance-of-payments crisis.

“I think there won’t be any intervention as the IMF had repeatedly asked the central bank to allow flexibility in the rupee,” said a currency dealer who declined to be identified.

“We believe the rupee will further depreciate as we haven’t seen the volume of expected foreign inflows. It will be hard to see the rupee regaining to 125 unless there is intervention under these circumstances.”

The rupee has fallen 13.6 per cent since February.

Stocks edged up for a third straight session in thin trade as investors picked up some select blue-chip shares such as market heavyweight John Keells Holdings PLC, though foreign investors sold a net Rs. 38.8 million ($ 297,700) worth of shares.

The main index gained 0.27 percent, or 12.74 points, to end at 4,811.44.

Shares in John Keells Holdings gained 0.73 per cent to Rs. 180.

But analysts said trade was thin as investors were concerned about economic worries including rupee volatility and high interest rates.

Turnover was Rs. 153.4 million ($ 1.18 million), well below the daily average of Rs. 961 million this year.