Rupee slips on importer dollar demand; seen under pressure

Wednesday, 5 November 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee ended a tad weaker on Tuesday on importer dollar demand, and dealers expect the local currency to be under pressure due to rising imports in a stable exchange rate regime. The spot rupee ended at 130.90/98 per dollar, compared to Monday’s close of 130.90/95. The spot rupee was not traded in early session as dealers were reluctant to trade above 130.85, a level seen as desired by the central bank. Three-day forwards, or spot next, which were actively traded in the absence of spot trade, closed at 131.00/05 per dollar compared with Monday’s close of 130.92/131.00. While there was no moral suasion during this session, dealers and banks were unwilling to trade the spot as the central bank has been preventing any spot trade below 130.85 since last week. The market expects the local currency to face more pressure due to rising seasonal imports and lower rates at least through November and an appreciation in December due to inflows from remittances and lower imports, dealers said. The Central Bank’s stable exchange rate policy would encourage more imports in the medium term, they said. Central Bank Governor Ajith Nivard Cabraal said during a Reuters post-Budget forum in Colombo on 27 October that the trend was for an appreciating rupee. He did not elaborate. The Central Bank has been dissuading banks from trading in the spot and three-day currency forwards below different pre-determined levels from time to time to prevent volatility. Overseas investors sold a net Rs. 36.2 billion ($ 276.9 million) worth of government securities in the six weeks through 29 October, data from the Central Bank showed.

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