Rupee ends steady after CB head allays fears

Thursday, 1 September 2016 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: The rupee ended steady on Wednesday as importer dollar demand was offset by greenback sales, a day after central bank governor Indrajith Coomaraswamy said the currency was not under upward pressure as capital inflows had not been of sufficient magnitude to exert such pressure.

Dealers said the rupee could appreciate if the Central Bank does not buy the US dollar from the market since capital inflows into government securities have started and also due to $ 1.5 billion sovereign bond inflows.

Coomaraswamy told reporters late on Tuesday that the Central Bank had absorbed a net $ 600 million from the market since the International Monetary Fund approved a $ 1.5 billion, three-year loan in June.

“Exchange rate is fairly stable. I don’t think capital inflows have been of sufficient magnitude to exert too much (upward) pressure as yet,” he told reporters in Colombo.

The spot rupee ended steady at 145.55/60 per dollar, while one-week rupee forwards also ended largely unchanged at 145.75/80.

The Central Bank held its key policy interest rates steady after market hours on Tuesday, saying previous tightening measures are being gradually transmitted to the economy.

“There is hardly any importer dollar demand. We see some exporter conversions and banks selling dollars for foreign investors to buy local bonds,” a currency dealer said asking not to be named.

“Imports are curbed because of the tight monetary policies at the moment.”

Dealers said the central bank was not seen intervening in the market to defend the currency. Central Bank officials were not available for comment. The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

The Central Bank has largely not intervened to defend the rupee ever since a dual-tenure sovereign bond issue raised $ 1.5 billion in July.

Net foreign inflows into government securities jumped 31.4% to Rs. 302.4 billion ($ 2.08 billion) through 24 August, according to the latest Central Bank data, since the International Monetary Fund approved a three-year, $ 1.5 billion loan on 4 June.




Stock market posts over 2-week closing low on profit-taking


Reuters: Shares edged down on Wednesday to post over two-week closing lows as investors sold large caps to book profits while retail investor participation rose a day after the Central Bank held its key policy rates steady.

The Central Bank left the key policy interest rates unchanged on Tuesday, as expected, saying previous tightening measures are being gradually transmitted to the economy.

The benchmark Colombo stock index ended 0.21% weaker at 6,528.21, its lowest close since 12 August. For the month, it gained 2.1%, the second straight monthly rise.

“Today was an active day, we saw that retail investors, institutions and foreigners were active. We saw some profit-taking coming in,” said Yohan Samarakkody, head of research, SC Securities Ltd.

Turnover stood at Rs. 1.1 billion ($ 7.57 million), more than this year’s daily average of Rs. 755.4 million.

Foreign investors bought a net Rs. 266.4 million worth of shares, extending the net foreign inflow so far this month to Rs. 979.9 million worth of equities.

However, they have been net sellers of Rs. 3.67 billion worth of shares so far this year.

Shares in Ceylon Tobacco Company Plc fell 3.6%, while those in Nestle Lanka Plc dropped 1.30%.