Rupee weaker on importer dollar demand

Wednesday, 7 August 2013 00:18 -     - {{hitsCtrl.values.hits}}

Reuters: The rupee ended weaker on Tuesday as light importer dollar demand offset exporter dollar sales and a vigilant Central Bank, eager to hold the greenback below Rs. 132.00, also forced dealers to shift to forward trades. Some dealers said they moved to one-day forwards instead of spot trade after the Central Bank’s earlier direction to banks not to accept bids above 131.60 rupees per dollar. The one-day forward ended weaker at 131.73/75 per dollar from Monday’s close of 131.62/65. “There was importer dollar demand but more than that, since Friday is a holiday, the holding cost is high,” said a currency dealer on condition of anonymity. Central Bank officials were not available for comment. Dealers said the pressure on the currency remained as exporters adopted a wait-and-see approach, while remittances had also dried up. The downward pressure on the rupee could intensify if there were no dollar inflows in the short term, they added. The rupee has fallen around 4% since 7 June, after foreign investors started to pull out of Sri Lanka’s Treasury bonds due to a rise in US treasury yields. Data from the Central Bank, which has stopped publishing foreign holdings in long term T-bonds separately since 28 June, showed total foreign holdings in government securities rose 1.2% between 5 June and 2 August, which currency dealers attributed to foreign buying in short term T-bills. Dealers expect the rupee to move in a 131.50 to 132.00 range in the short term and continue to depreciate unless the Central Bank steps in with monetary tightening measures or dollar inflows increase significantly.