COLOMBO, May 24 (Reuters) - Sri Lankan rupee forwards ended weaker on Tuesday as dollar demand from importers offset selling by banks, amid the currency expected to weaken on a possible increase in government spending after the worst natural disaster since 2004.
On Monday, the government said the cost of landslides and floods, following days of torrential rains, will be between $1.5 billion and $2 billion at the minimum, as the Indian Ocean island struggles to recover from its worst natural disaster since the 2004 Asia tsunami.
The dollar/rupee forwards, known as spot next, ended at 146.98/147.10 per dollar compared with Friday’s close of 146.85/90.
Markets were closed on Monday for a special bank holiday.
“There was no (dollar) liquidity in the market as there were not much of dollar sales by exporters or banks but the demand (for dollars) was there from importers,” a currency dealer said, asking not to be named.
“If the expected foreign inflows do not come, it could weigh on the rupee with high borrowing.”
Finance Minister Ravi Karunanayake told parliament last week that Japan would lend Sri Lanka more than $3.5 billion, mostly to finance development.
The currency would stabilise in the 146.00 per dollar range in early June after money from an IMF loan flows in, Karunanayake also said.
The spot currency did not trade on Tuesday.
The spot rupee reference rate has been pegged at 145.75, dealers said. Sri Lanka’s central bank had fixed the spot rate at 143.90 per dollar until May 2.
$1 = 146.2000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips