Rupee edges up on inflows

4 July 2014 06:30 pm

he Sri Lankan rupee ended slightly firmer yesterday due to inflows from remittances and exporter dollar sales, while one-month forward premiums fell to more than a three-year low on the hopes of further gain in the currency.

The rupee ended at 130.26/27 per dollar, up from Thursday’s close of 130.27/28 per.

“There are heavy inflows and no buyers. The state banks are buying dollars at Rs.130.26, one cent below yesterday,” a dealer said. “Imports have dried with less economic activity.”

There are heavy inflows and no buyers. The state banks are buying dollars at Rs.130.26, one cent below yesterday

Dealers said the fuel import bill, which accounts for around 20 percent of monthly imports, is also on the decline because the country has been shifting to alternative power sources such as coal and hydro. Dealers also said the one month forward premiums fell sharply yesterday to 22/28 cents, its lowest since May 3, 2011, dealers said.

They see the rupee trading between 130.40 and 130.50 in the event of any downward pressure in the next one month and expect imports and credit growth to pick up from August.

An official at the Central Bank’s International Operations Department said on Wednesday the bank has been buying excess dollars from the market.

Some dealers expect the rupee to face downward pressure due to continued imports and the possible fallout from the government spokesman’s announcement that the country had imported Iranian crude via third parties to avoid Western sanctions.

Currency dealers said it was too early to speculate on the implications of the country breaching U.S. sanctions.

(REUTERS)