Rupee ends steady as remittances offset importer dollar demand

REUTERS: The Sri Lankan rupee ended steady yesterday as inward remittances offset dollar demand from importers, dealers said.
Rupee forwards were active, with spot-next forwards closing at 152.85/90 per dollar, unchanged from Friday’s close.
“There were some inward remittances and the (importer) demand was there from a state bank, probably to settle some oil bills,” a currency dealer said, requesting anonymity.
The rupee has been under pressure after Central Bank Governor Indrajit Coomaraswamy said last month the bank would allow gradual depreciation of the currency.
The Central Bank has set a target of US $ 1.2 billion in direct market purchases of dollars to boost the island nation’s reserves this year.
The spot rupee, which the Central Bank had fixed at 152.50 since May 5, did not trade yesterday. Foreign investors bought a net Rs.1.37 billion worth of government securities in the week ended June 7. They have sold a net Rs.39.96 billion worth of securities so far this year.
Trading was dull as investors assessed the extent of damage to the economy from recent floods and landslides.
The country’s main agricultural crops - tea and rubber - were hit by the worst torrential rains in 14 years. Damage to agricultural exports would put pressure on the rupee, currency dealers said.
However, they added there was some optimism over expected inflows in the form of international assistance that could help offset potential downward pressure on the local currency.
While the inflows are likely to help the rupee, the Central Bank would have to tighten interest rates to curb unnecessary credit growth and inflationary pressure, they said.
The floods could hurt overall economic growth and also widen the government’s budget deficit with high infrastructure spending.