Rupee forwards fall on importer dollar demand

Thursday, 23 April 2015 01:15 - - {{hitsCtrl.values.hits}}

Reuters: Rupee forwards closed a tad weaker on Wednesday due to importer dollar demand, while the local currency is expected to be under pressure through the middle of this year due to lower interest rates. Actively traded one-month forwards ended at 134.70/90 per dollar, compared with Tuesday’s close of 134.25/40. Two-week forwards ended steady at 133.90/134.00 per dollar and one-week forwards closed unchanged at 133.60/70, amid moral suasion of the Central Bank, dealers said. Currency dealers also said the political uncertainty was weighing on investor confidence and putting pressure on the exchange rate. They said the rupee would be under pressure through June as credit growth is expected to hit a peak in a lower interest rate environment. The Central Bank cut key rates last Wednesday in a surprise move to record lows and said in its monetary policy statement that the outlook on balance of payments remains favourable in 2015. Finance Minister Ravi Karunanayake said there were sufficient funds to defend the currency and a lot of foreign inflows are expected. The Central Bank through moral suasion prevented the spot rupee from dropping below 132.90/133.20, a limit it set in February. Central Bank officials were not immediately available for comment. Bond dealers said yields fell 15-25 basis points across the board, while long-tenure Bond yields fell 35 basis points due to high rupee liquidity in the absence of open market operations by the Central Bank. Investors have been cautious due to political uncertainty as Prime Minister Ranil Wickremesinghe’s party did not have a majority in Parliament. President Maithripala Sirisena had promised to dissolve Parliament after 23 April and go for Parliamentary elections.

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