Rupee trades steady despite importer dollar demand

14 August 2015 06:30 pm - 0 - {{hitsCtrl.values.hits}}

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REUTERS -The Sri Lankan rupee traded steady yesterday despite importer dollar demand ahead of the parliamentary election on Monday, while dealers said they expected the currency to face further pressure in line with weakening regional currencies.

The rupee traded steady at 133.90 per dollar as one of the two state banks, through which the central bank usually directs the market, sold dollars at a flat rate of 133.90.

“There was importer dollar demand with some booking forwards. Exporters are staying away from the market as they expect more depreciation in the currency,” a currency dealer said asking not to be named.

“I do not see any logic in the Central Bank defending the rupee while other regional currencies are allowed to fall. After the election, the central bank might allow a fall in the currency.”

The rupee fell for a second straight session on Thursday as the state-run bank raised the currency’s peg against the dollar by 10 cents to allow the exchange rate to depreciate to 133.90.

Dealers say the currency may fall to 135 levels in the short term if the Central Bank permits the rupee to depreciate, in line with the weakening seen in other global currencies against the dollar.

The currency has fallen 0.3 percent since Aug. 5 as the state-owned bank raised the currency’s peg against the dollar by 40 cents on three occasions, allowing the exchange rate to fall.

The fall in China’s yuan, which hit a four-year low on Wednesday after its central bank devalued the currency on Tuesday, has sparked fears of a “currency war” and roiled global financial markets, dragging other Asian currencies to multi-year lows.

Sri Lankan shares were trading near seven-month highs ahead of the polls on Monday.

The main stock index was 0.33 percent higher at 7,453.89 by 0721 GMT, near its highest since Jan. 19 hit on Wednesday.

The index has risen nearly 8 percent since July 8 through Wednesday as investors picked up risky assets on expectation strong corporate earnings and political stability after the elections would boost sentiment.

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Rupee trades steady despite importer dollar demand

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