Rupee forwards down on stronger dollar

REUTERS: Sri Lankan rupee one-week forwards fell yesterday as a strong dollar after Britons voted to leave the European Union (EU) hit importers, but sale of the U.S. currency by a state bank capped losses, dealers said. Sterling stayed under siege yesterday, holding above a 31-year low against the dollar, with sentiment distinctly sour after Britain opted to exit the EU, triggering shockwaves across global markets. The dollar index, which tracks the greenback against six major peers, advanced 0.5 percent to 95.880 yesterday, remaining near a three-month high of 96.703, which hit in the previous session. The euro was also under pressure, pulled down by sterling, as Brexit clouded the future of the EU.

Safe-haven currencies like the yen and the Swiss franc extended gains, much to the discomfiture of the Japanese and Swiss central banks. One-week dollar/rupee forwards, which have been acting as a proxy for the spot rupee, traded at 148.15/25 per dollar at 0703 GMT, weaker from Friday’s close of 147.90/148.00. Dealers said one of the two staterun banks, through which the Central Bank usually directs the market, sold dollars at Rs.148.25. The Central Bank officials were not available for comment. “Demand for dollar is there. A state bank sold dollars at Rs.148.25 and prevented the fall,” said a currency dealer asking not to be named. Dealers said the three-day dollar/rupee forwards, known as spot next, which was not traded since June 15, started trading yesterday. The forwards traded at 147.90/10 per dollar yesterday. It closed at 144.85/90 per dollar on June 15. Spot next, which has acted as proxy for the spot currency since January, indicates the exchange rate for the day following conventional spot settlement. For yesterday’s trade, the spot next settlement takes place three days ahead.