Friday, 28 March 2014 00:00
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REUTERS: The rupee ended unchanged on Thursday despite importer dollar demand as dealers were reluctant to trade above the Rs. 130.70 level due to moral suasion by the Central Bank and the market was forced to trade in forward, dealers said.
The Central Bank asked banks to keep the rupee at the Rs. 130.70 per dollar level to keep volatility low, dealers said.
The spot rupee ended flat at Rs. 130.70/75 per dollar.
“They didn’t want the spot over Rs. 130.70. So swaps and forwards were active,” said a currency dealer.
An official at the Central Bank’s International Operations Department denied dealers’ claims of moral suasion.
The exchange rate was moving in the Rs. 130.65-130.75 range and there was not much volatility, the officer said.
Dealers expect the rupee to appreciate from early April, with a dip in importer dollar demand and a rise in inward remittances.
The local currency has been largely on the rise ahead of the traditional New Year, contrary to market expectations. The rupee usually falls in March and early April due to higher import demand ahead of the Sinhala-Tamil New Year.
Central Bank Governor Ajith Nivard Cabraal said last week the rupee would be stable throughout this year due to increasing inflows from exports and remittances into the island nation.
Dealers said lack of credit demand for imports will help reduce downward pressure on the rupee.
The currency gained 0.25% in the 20 sessions through Wednesday, Thomson Reuters data showed. It has fallen 0.08% so far this year.
The rupee has trended up since 27 February amid weak demand for dollars from importers, said dealers. They expect the currency to trade in a range of Rs. 130.50-130.75 in the near term.
