Sri Lankan Rupee Weaker on Importer Dollar Demand

The Sri Lankan rupee was weaker on Wednesday due to dollar demand from importers, dealers said, while the market shrugged off central bank chief Indrajit Coomaraswamy’s comment on the currency’s stability in the near future.

Coomarswamy late on Tuesday said he expected the rupee to stabilise when the $1 billion sale of a stake in the southern port of Hambantota to a Chinese investor was completed in four to five months.

Despite the rupee being under downward pressure, the central bank kept its benchmark interest rates on hold late on Monday, as expected, saying its monetary policy stance remained appropriate as credit growth slowed.

Rupee forwards were active, with one-week forwards trading weaker at 148.65/80 per dollar, compared with Tuesday’s close of 148.60/70.

“Still the (importer) demand is there. This trend will continue till the budget,” a currency dealer said, asking not to be named.

The central bank on Friday raised the spot reference rate by 50 cents to 147.40 per dollar from 146.90 as higher importer dollar demand weighed on the currency, while moral suasion by the central bank prevented a steeper fall in the rupee.

The spot rupee is usually managed by the central bank, and market participants use the forward market levels for guidance on the currency.

Officials from the central bank were not available for comment.

Dealers said selling of government securities by foreign investors also put pressure on the currency.

Foreign investors have sold a net 16 billion rupees ($108.40 million) worth of government securities in the two weeks to Oct. 26, data from the central bank showed.

The market was waiting for direction from the national budget, which is due on Nov. 10, dealers said.

Sri Lankan shares were firmer, with the benchmark Colombo stock index up 0.06 percent at 6,403.77 as of 0553 GMT. Turnover stood at 135.9 million rupees ($918,243).

Courtesy : LBO