Rupee forwards end weaker; seen falling

Friday, 6 February 2015 00:31 - - {{hitsCtrl.values.hits}}

Reuters: Rupee forwards closed weaker on Thursday as policy uncertainty weighed on the currency, discouraging exporter selling of dollars amid importer demand, dealers said. One-month forwards ended at 133.80/95 per dollar compared with Monday’s close of 133.67/70. Markets were closed for local holidays on Tuesday and Wednesday. Currency dealers said the rupee may depreciate because of an expected increase in consumption after a raft of tax reductions on key commodities in last week’s supplementary budget. Fears of depreciation kept exporters away from the market, resulting in the currency’s fall and leading the central bank to cap four-day forwards at 133.00 and one-week forwards at 133.40, dealers said. One-week forwards were capped at 133.40, after closing at 133.30/40 on Monday. That forced dealers to trade in the forwards two-days above one-week, which ended at 133.45/50, dealers said. Two-week forwards ended at 133.52/60 per dollar. The new Government on Thursday imposed taxes on cash-rich firms to pay for populist policies and tax reductions on key commodities in a bid to woo voters as it faces a parliamentary election in the second quarter. Dealers said exporters were reluctant to sell as they expected further depreciation in the currency in the short term, due to the widening trade balance and in line with softer global currencies. The spot currency has not been trading, while forwards are facing downward pressure, dealers said. The market had been expecting a flexible exchange rate with more foreign grants under the new Government as opposed to the controlled exchange rate regime earlier.

Secondary market bond yields edge up further amidst thin volumes

By Wealth Trust Securities The increasing trend in secondary market bond yields continued yesterday as well, mainly on the liquid maturities of 15.05.2017, 01.04.2018 and 01.07.2022 to hit intraday highs of 7.07%, 7.15% and 7.72% respectively on the back of thin volumes. Meanwhile, the two-way quotes on 15.08.2018, 01.07.2019 and 01.05.2021 maturities increased to levels of 7.18/25, 7.20/28 and 7.55/65 respectively while on the 01.01.2024 remained unchanged at levels of 8.10/20. In money markets, The Central Bank’s Open Market Operations (OMO) Department was seen mopping up excess liquidity by way of one-term repo auction and two auctions for outright sales of Treasury bills. The term repo auction drained an amount of Rs. 32 billion at a weighted average of 5.98% for 77 days, while a further amount of Rs. 8.65 billion was mopped up for 14 and 56 days at weighted averages of 5.69% and 5.75% respectively through the outright sales. Overnight call money and repo rates remained steady to average 6.04% and 5.71% respectively. Rupee remains steady The active one week forward USD/LKR contract was seen trading at levels of Rs. 133.30 to Rs. 133.45 before closing at levels of Rs. 133.30/35 while spot next contracts were seen closing at levels of 132.80/00. The total USD/LKR traded volume for the 2 February 2015 was $ 29 million. Some of the forward USD/LKR rates that prevailed in the market were one month - 133.75; three months - 134.70 and six Months - 136.20.

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