Rupee forwards down on imports, foreign bond sales

Saturday, 5 March 2016 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Rupee forwards ended weaker on Friday on dollar demand from importers and as foreign investors sold Government securities, dealers said.

Fitch’s downgrade of Sri Lanka’s sovereign rating also weighed on the currency, said some dealers, adding the rupee would face further downward pressure due to seasonal importer demand.

Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, however, said the downgrade will not impact the country’s borrowing.

“There was demand today from the importers and also from the foreigners who are selling government bonds,” said a currency dealer asking not to be named.

“A private bank sold dollars in the market, but it could not hold the market.”

The downgrade will be of concern to international investors and market players, analysts said, adding it would push up the cost of government borrowings in the international market, putting pressure on the rupee.

One-week rupee forwards, which act as a proxy for the spot currency, ended at 145.05/15 per dollar, weaker from Thursday’s close of 144.90/145.00.

The spot currency did not trade below 143.90, seen as the Central Bank’s desired level.

Foreign investors sold Rs. 961 million ($6.7 million) worth of Government securities in the week ended 2 March, data from the Central Bank showed, taking the total offloaded since 30 December to Rs. 35.9 billion.

Commercial banks parked Rs. 10.388 billion ($72.06 million) of surplus liquidity on Friday, using the Central Bank’s deposit facility at 6.50%, official data showed.

The Central Bank’s net holding of Government securities was down by Rs. 12.7 billion on Friday, official data showed.