Sri Lankan Rupee Falls Slightly on Importer Dollar Demand

The Sri Lankan rupee edged down on Thursday due to importer dollar demand in the absence of central bank intervention, and the market expects the local currency to be under pressure due to seasonal demand from importers until the year-end, dealers said.

The spot rupee was at 146.80/90 per dollar at 0730 GMT, compared with Wednesday’s close of 146.70/75.

“Foreign buying into government securities has slowed with the fall in interest rates and there are inflows from remittances and stock-related transactions,” said a currency dealer asking not to be named.

“But we see some of the dollars from the inflows are bought by the central bank. So with the importer dollar demand picking up, the rupee is under downward pressure. This will continue until the Christmas festival.”

Officials at the central bank were not available for comment.

The central bank has been under pressure from the International Monetary Fund (IMF) to continue rebuilding international reserves and maintain exchange rate flexibility to develop the foreign exchange market further.

Usually the central bank intervenes whenever there is volatility.

The rupee has been under pressure due to importer dollar demand, posting a 0.65 percent decline last week.

Finance Minister Ravi Karunanayake said on Monday the government wanted a strong currency through higher foreign inflows and without interventions.

Sri Lankan shares were down on profit-taking with the benchmark Colombo stock index 0.24 percent weaker at 6,563.83 as of 0747 GMT. Turnover was at 408.4 million rupees ($2.78 million).

Courtesy : LBO