The rupee hit a record low of 158.20 per dollar on Tuesday after the central bank chief said the currency will depreciate gradually, while exporters stayed away from the market expecting further weakness.
The spot rupee ended at 158.10/30 per dollar, compared with Monday’s close of 157.95/158.10.
Dealers, however, said the market switched to rupee forwards as buying dollars for spot rupee was very difficult amid worries that the Central Bank could take actions against possible market manipulations.
The one-month rupee forwards traded at as low as 159.00 per dollar, dealers said.
The rupee will depreciate gradually as dollar outflows surpassed inflows, Central Bank Chief Indrajit Coomaraswamy said on Friday.
“There were flows today but the sellers are very reluctant to sell (dollars) with globally the dollar is strengthening,” a currency dealer said.
“There was no intervention by the Central Bank today,” the currency dealer added.
The currency has declined 0.25% so far this month after a 1.5% fall in April. It has slipped 3% this year.
The Central Bank is “studying carefully” if there was extra pressure on the currency than what was expected, and also the behaviour of market participants, Coomaraswamy had said on Friday.
The Central Bank said on 26 April it would intervene to support the rupee when necessary and there was no reason for the rupee to be under pressure given the country’s record $ 10 billion foreign currency reserves.
Dealers said they expect the rupee to gradually weaken and face higher volatility this year due to debt repayments by the government.
However, senior central bank Deputy Governor Nandalal Weerasinghe on Thursday said debt repayments by the government will not have an impact on the currency as they are managed with borrowed money externally.
Foreign investors sold government securities worth a net Rs. 4.05 billion ($ 25.64 million) in the week ended 9 May, bringing the outflow so far this year to Rs. 9.8 billion, Central Bank data showed.
Courtesy: Daily FT