Rupee slides on dollar demand from importers, foreign banks
Thursday, 27 June 2013 02:11
REUTERS: The rupee fell 0.8% on Wednesday to a near seven-month low, which dealers attributed to dollar demand from foreign banks to accommodate bond sales by offshore investors, but the Central Bank said it was mainly due to importer demand.
The rupee was quoted at Rs. 127.70/80 per dollar in intra-day trade on Wednesday, its lowest since 3 December and 0.77% weaker to Tuesday’s close of Rs. 129.70/80, Thomson Reuters data showed.
Three dealers said the lowest deal was done at Rs. 127.65 rupees. The rupee has fallen 1.7% so far this year following a 10.7% depreciation in 2012 as the Central Bank allowed for a flexible exchange rate regime in February last year. “Some foreign bondholders are pulling back from long-term government securities,” one currency dealer said on condition of anonymity. Central Bank Deputy Governor Nandalal Weerasinghe said the net outflow from foreign bond sales was only $ 12.5 million whereas dollar demand from importers has been much more than this on a daily basis.
“There is importer demand for dollars rather than foreign outflows. We haven’t seen many foreign investors selling bonds as dealers say. There was an $ 8 million worth petroleum import bill today. So it is wrong to say the depreciation is due to foreigners selling bonds,” said Weerasinghe.
Two dealers said an unexpected 2 percentage point cut in commercial banks’ statutory reserve ratio (SRR) by the Central Bank earlier in the day would have also prompted foreigners to either take profits or change positions to go for short-tenure securities. The Central Bank slashed the SRR in a bid to boost economic growth after recent monetary easing steps to reduce borrowing costs failed to produce the desired results.
Sri Lanka’s main stock index fell 0.22% or 13.54 points to 6,072.68, its lowest since 3 May, on foreign selling in market heavyweight John Keells Holdings amid concerns over a possible pullout by more foreign funds.
The market witnessed net foreign outflows of Rs. 636.8 million on Wednesday, its highest since 30 January. The bourse has enjoyed net foreign inflows of Rs. 15.58 billion this year. John Keells fell 3.86% to Rs. 249.
The day’s turnover was at Rs. 2.27 billion ($ 17.61 million), more than twice this year’s daily average of around Rs. 1 billion.