Rupee steady; CB stops dollar sales

Reuters: The rupee ended flat at 130.60 per dollar on Tuesday at its near eight-month low as thin demand for dollars from importers offset dollar sales by exporters in the absence of Central Bank intervention.
Currency dealers said the Central Bank’s decision to hold the rupee at 130.60 forced banks to shift to forward buying at higher premiums, with the local currency remaining under pressure on concerns of further weakening due to fears over foreign outflows.
Currency dealers said the rupee’s spot-next traded at a high of 131.05 per dollar during the day before it closed at 130.95.
An official at the Central Bank’s International Operations Departments told Reuters that the bank did not intervene in the market on Tuesday as it was functioning smoothly.
“I think the Central Bank is going to let it go,” a currency dealer said on condition of anonymity. “There is a bond maturating and a foreign fund is coming to the market on Thursday.”
Until Tuesday, the Central Bank had been asking banks to not to buy dollars beyond Rs. 130.60 since last week to stabilise the currency.
The Central Bank’s latest data showed foreign investors have sold a net Rs. 105 million ($804,000) in Government securities in the week ended 3 July, but it held back individual data on foreign holding in T-bills and T-bonds.
Foreign investors have been selling longer tenure T-bonds and some shifting to short tenure T-bonds since early last month, the Central Bank’s data has showed.
The rupee fell 3.12% in June as foreign investors pulled out of Sri Lankan treasury bonds due to a rise in US treasury yields on concerns the Federal Reserve would soon start trimming its stimulus program.