Rupee strengthens on dollar sales by state banks

15 February 2012 07:58 am - 3 - {{hitsCtrl.values.hits}}

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Reuters—Sri Lanka's rupee currency, which had an all-time closing low on Tuesday, initially weakened further today but then strengthened as state banks sold dollars.

The rupee was trading at 119.80/120.00 to the dollar, compared with Tuesday's close of 120.20, after a day of heavy forward bookings of dollars by importers.

The currency has been volatile since the central bank on Feb. 9 stopped intervening in the foreign-exchange market to defend a specific level.

Three dealers said that on Tuesday, the rupee was traded as weekly as 120.90 rupees in early trade, then strengthened to 119.80 on sales of dollars by state banks.

The central bank were not immediately available for comment on Wednesday on whether it had directed state banks to sell dollars, or the sales stemmed from other factors.

On Tuesday, the central bank said that the rupee volatility was because of hedging by importers and it said it expects the currency to recover.

Currency dealers expect further depreciation with high volatility after the central bank changed its intervention method to a quantity, instead of defending a particular level of the currency against the U.S. dollar. It had spent more than $2.7 billion to defend the currency since July.

The rupee weakened 2.25 percent on Tuesday, extending the fall to 5.4 percent for the first three sessions following the central bank's policy change.

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Comments - 3

garawi Sunday, 19 February 2012 03:15 PM

This gain mean nothing to investors of last year in US Funds as when the funds are returned the investment will only be a loss for the rate has jumped from 112 to 119 in one year.

prof.k Wednesday, 29 February 2012 11:54 AM

according to one calculation conducted by us (one maths prof. and myself) the rupee is inclined to depreciate all the way down to Rs 170 per USD that is if the state does not take necessary and sufficient measures to curb it. Dirty dealing (to sell by SLR) is not sufficient. What is required is to promote the export high-tech goods and services. Otherwise there is no shortcut to solving the problem.

Sammy Saturday, 18 February 2012 04:55 AM

Obviously, this is not going to be for too long.

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Rupee strengthens on dollar sales by state banks

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