Rupee weakens

The rupee traded weaker on Thursday because of increased dollar demand from importers, traders said. It lost 15 paisas to close at 156.38 against the greenback in the interbank market.

The currency traded firmer at 156.50 against the dollar in the kerb dealings. Traders said a fresh rise in the dollar demand for import payments weigh on the currency. “There were some import payments, which surpassed dollar inflows,” a trader said.

“Importers bought dollars to cover payments before the 9th and 10th of Muharram [Ashura] holidays.” The rupee was traded at 156.70 and 156.75 in TOM (one-day forward market). “We see the rupee to weaken further against the greenback in the coming session,” the trader added.

Investors were upbeat on the completion of consumer price index (CPI) inflation rebasing by the government. Under the new base year (FY16) August 2019 CPI inflation stood at 10.49 percent versus 11.63 percent under FY08. Market is pinning hope on the lower number, betting on an earlier than expected rate cut. This is reflective in the secondary market yields, which have come down by more than 100bps over the last few days, a brokerage report showed.

“That said, although real rates remain above the long-term average, they remain well within the range; we have seen previously under a fresh IMF program,” the report published by Alfalah Securities said.