April 24, 2009 (LBO) – The rupee weakened to 120.70 levels against the US dollar, with a foreign bank on the buying side Friday, but recovered later in the day ending a week that saw the domestic currency fall about four rupees, dealers said. In late afternoon trade the spot dollar was quoted at 120.0/30 levels after opening at 120.30/60 rupees.
Dealers said state bank activity was muted, though they bought dollars a day earlier just under 120.00 rupees.
The rupee is floating with no central bank intervention ahead of an International Monetary Fund bailout in May.
Sri Lanka’s central bank governor Nivard Cabraal and a team of government officials are now in Washington to hammering out the final details of a deal, while attending the annual meeting of the Fund and World Bank.
The rupee opened 116.00/20 against the greenback Monday and rapidly weakened toward 120.00.
The rupee is emerging from more than seven months of peg defence that has lost the country more than two thirds of its foreign reserves.
Active exporter selling is still not evident in the market indicating expectations of further adjustment.
The rupee fall comes as imports collapse and the trade deficit narrows rapidly.