Friday, 31 January 2014 00:34
Reuters: The rupee ended firmer on Thursday due to exporter dollar sales in the absence of importer demand for the greenback and intervention from State banks, but dealers expect the currency to fall on possible foreign outflows after the US Federal Reserve further trimmed its monetary stimulus.
The Fed announced a further $10 billion reduction in its monthly bond buying as it stuck to plans to wind down its extraordinary stimulus despite the recent turmoil across many emerging markets.
The spot rupee ended at 130.63/65 per dollar, firmer from Wednesday’s close of 130.72/82.
“There were dollar sales by banks for exporters. We did not see any intervention from the two State banks,” a currency dealer said on condition of anonymity.
Dealers said the market is concerned about a possible gradual pull-out of foreign investors from Government securities, resulting in depreciation of the currency.
Foreign investors hold Rs. 482.84 billion ($ 3.69 billion) in Sri Lankan Government securities, mostly in illiquid long-term T-bonds.
Central Bank Governor Ajith Nivard Cabraal said on Monday in the event of the Federal Reserve trimming its stimulus, Sri Lanka should not experience any major capital outflows or market volatility.
However, dealers said the Fed’s stimulus cut will have an impact on local interest rates in the event foreign investors withdraw their funds from T-bonds.
The rupee fell 0.2% in the two sessions through Tuesday because of bond outflows on fears over the Fed further trimming its monetary stimulus and demand for the greenback from importers despite dollar sales by a State bank to prevent the fall.
Dealers expect the rupee to fall in the absence of any intervention by the Central Bank due to importer dollar demand but see the currency trading between 130.50 and 131.50 in the near future.
The rupee has gained about 3.4% since it hit a record low of 135.20 on 28 August. It lost 2.5% in 2013.