Thursday, 11 July 2013 02:55
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Reuters: The rupee spot ended flat at 130.60 per dollar on Wednesday at a near eight-month low, but currency dealers said banks were compelled to trade on spot-next as there was no effective spot rate in the market.
Currency dealers said though there were offers up to 131.10 for the rupee spot rate, none of the banks were trading spot after the Central Bank, though State banks, guided the market to hold the rupee at 130.60.
“There was no effective spot. The spot-next is trading between 131.00/10,” a currency dealer said on condition of anonymity. “The pressure looks to have eased, but nobody knows where the rupee will be if it comes under pressure again.”
Currency dealers said the rupee’s spot-next ended at a high of 131.05 per dollar from Tuesday’s close of 130.95.
Dealers say the currency remains under pressure on fears of further foreign outflows.
However, Central Bank Governor Ajith Nivard Cabraal said on Wednesday that foreign holdings of Government securities remain above the official threshold and there have been no significant outflows as speculated by currency dealers.
The Central Bank’s latest data showed foreign investors have sold a net Rs. 105 million ($ 804,000) in Government securities in the week ended 3 July, but it held back individual data on foreign holdings of T-bills and T-bonds.
Foreign investors have been selling longer tenure T-bonds and some have been shifting to short tenure T-bonds since early last month, the Central Bank’s data has showed.
The rupee fell 3.12% in June as foreign investors pulled out of Sri Lankan treasury bonds due to a rise in US treasury yields on concerns the Federal Reserve would soon start trimming its stimulus program.
Meanwhile shares recovered on Wednesday from a near 10-week low, gaining for the first time in six sessions, led by market heavyweight John Keells Holdings in bargain hunting.
The main share index rose 0.6%, or 35.89 points, to 6016.05 points, just off its Tuesday close, the lowest since 2 May. It had fallen for the five sessions through Tuesday, losing a total of 2.6%.
“There was some bargain hunting in Keells,” said a stock broker. “Whether the market can be sustain the gains is doubtful. We are closely monitoring foreign flows as we have seen some large foreign outflows in the past few days.”
Foreign investors were net buyers of Rs. 8.1 million ($ 61,900) worth of shares on Wednesday and they have been net buyers of Rs. 15.74 billion in stocks in 2013.
Shares in Keells rose 2.56% to Rs. 248 a share.
Stockbrokers said concern over the further weakening of the rupee has dented investor sentiment, with many investors waiting for clear directions on the currency.
