Rupee down, stocks up

Tuesday, 2 July 2013 00:07 -     - {{hitsCtrl.values.hits}}

Reuters: The rupee extended falls from last week to trade near eight-month lows on Monday, with banks buying dollars to meet demand from importers and foreign bond holders, currency dealers said. The currency was quoted 130.60/70 per dollar at 0513 GMT, a level last seen on 9 November 2012. It fell 1.24% last week and 3.12% in June, mainly as foreign investors pulled out of Sri Lankan Treasury bonds due to a rise in US treasury yields after the Federal Reserve’s plan to trim its stimulus program. “We don’t see foreign investors pulling out of bonds aggressively similar to the last few weeks. But the rupee is still under pressure as they are exiting gradually,” a currency dealer said on condition of anonymity. “There was also an oil import bill for small volume.” Some dealers said the currency would not depreciate sharply as the central bank has mopped up the local currency in the market and the depreciation would discourage foreign investors from selling the rupee-denominated bonds. Foreign investors in Sri Lanka’s Treasury bonds have been exiting gradually, Central Bank data showed on Friday, exerting pressure on the rupee. Foreign investors hold a net $ 3.79 billion in treasury bills and bonds, the latest Central Bank data showed. The Central Bank sold dollars on Thursday to ease volatility after the currency fell more than 1% during the day. Dollar assets have become a big lure for investors as the Fed prepares to dial down its massive bond-buying program, which has triggered a huge selloff in emerging market bonds and currencies in the past week. Sri Lanka’s main stock index was up 0.13% or 7.85 points at 0525 GMT. “There was foreign interest in select blue-chips like John Keells Holdings and Distilleries Company, while retail participation was also seen,” said a stock broker who declined to be named. “Investors are looking for direction with the start of a new month.” Stockbrokers said investors were concerned about the rupee’s fall amid a possible further pullout by offshore investors from equities. The Bourse saw a net foreign outflow of Rs. 1.03 billion ($7.90 million) last week. As of Friday, Sri Lankan equities have seen Rs. 15.18 billion of foreign inflows.