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Saturday, 28 May 2016 00:00 - - {{hitsCtrl.values.hits}}
Reuters: Rupee forwards ended weaker on Friday due to importer dollar demand amid fears that the currency could weaken if the Government increased spending following the country’s worst natural disaster since 2004, dealers said.
The cost of landslides and floods caused by days of torrential rain will be between $1.5 billion and $2 billion at the minimum, the Government said earlier this week, as the Indian Ocean island struggles to recover from a cyclonic storm.
Additional Government borrowing for post-disaster spending could hurt the currency if there is lack of foreign and local aid, the dealers added.
The dollar/rupee forwards, known as spot next, ended at 147.55/60 per dollar, weaker from Thursday’s close of 147.40/50.
The spot next, which act as a proxy for the spot currency, indicate the exchange rate for the day following conventional spot settlement, which is five days ahead for Friday’s trade.
“The (importer) demand was there but there was heavy moral suasion when trades took place at 147.60 per dollar,” a currency dealer said, referring to persuasion by the Central Bank and asking not to be named.
Central Bank officials were not available for comment.
The spot currency did not trade on Friday.
The spot rupee reference rate has been pegged at 145.75, dealers said. The Central Bank had fixed the spot rate at 143.90 per dollar until 2 May.
Despite foreign inflows into Government securities and expectations of some more inflows, the rupee continues to face pressure, dealers said.
Foreign investors were net buyers of Rs. 7.23 billion ($49.28 million) in the week ended 25 May, latest Central Bank data showed.
The Government was in the process of borrowing up to $3.5 billion from foreign sources via syndicated loans, sovereign bonds, and Islamic bonds, Finance Minister Ravi Karunanayake said earlier this week.
Analysts said foreign inflows from such loans or bond issues would ease pressure on the rupee.
