Rupee sinks to 6-month closing low

Wednesday, 12 June 2013 01:33 - - {{hitsCtrl.values.hits}}

Reuters - Sri Lanka’s rupee dropped to the lowest close in nearly six months on Tuesday, weighed down by banks’ demand for dollars to settle bond-related sales and importer buying of the U.S. currency, dealers said.

The rupee, which hit 127.80 per dollar in intraday trade, ended at 127.75/85, its lowest close since Dec. 19. It had closed at 126.55/60 on Monday.

“We see some small-time bondholders pulling back with the U.S. treasury yields moving upward,” a currency dealer said.

“They are also concerned over interest rates further coming down after the central bank’s comments.”

Dealers also said importers were buying dollars on concerns that the local currency may depreciate further.

The Central Bank Governor Nivard Cabraal, after holding key policy rates steady on Friday, said the monetary authority would issue guidelines to direct banks to cut lending rates and narrow the gap with the inflation rate.

The rupee has weakened 0.2% so far this year following a 10.7% depreciation in 2012 as the central bank allowed for a flexible exchange rate regime in February 2012.