COLOMBO, March 8 The Sri Lankan rupee ended
weaker on Wednesday on importer dollar demand, dealers said, a
day after the International Monetary Fund urged the country's
central bank to rebuild foreign reserves while maintaining
exchange rate flexibility.
Following its second review of a $1.5 billion three-year
loan programme, the IMF said it had discussed with Sri Lankan
authorities the need to push forward with reforms due to an
uncertain external environment.
Rupee forwards were active, with two-week forwards
ending at 152.35/50 per dollar, compared with Tuesday's close of
"Today importers desperately bought dollars. The IMF
statement on allowing a flexible exchange rate may be the reason
for today's depreciation as we did not see the central bank
guiding the market," said a currency dealer, asking not to be
"Anyway, the rupee is under pressure to depreciate and we
expect there will be around 6-8 percent depreciation during this
year. The possibility of the central bank raising interest rates
to prevent bond exit is also speculated."
Another dealer said inflow from an up to $1.5 billion
sovereign bond issue sooner than later could help ease some
pressure on the currency.
Sources who know about the bond deal said top central bank
officials have already left for the United States for a road
show for the sovereign bond issue announced last month.
Dealers said the rupee would be under pressure due to dollar
demand from importers ahead of the traditional Sinhala-Tamil New
Year in mid-April, and as foreign investors continue to sell
S&P Global Ratings said in a statement on Tuesday that it
considers exchange rate stability will remain a major priority
for Sri Lanka's policymakers and its central bank, limiting
The central bank is struggling to maintain a flexible
exchange rate in the face of heavy foreign outflows from
government securities. The rupee has depreciated 1.2 percent so
far this year, having lost 3.9 percent of its value against the
dollar last year.
Foreign investors bought a net 701 million rupees ($4.64
million) worth of government securities in the week ended March
1, recording the first weekly net inflow for the year. They have
sold a net 63.76 billion rupees of such instruments so far this
Sri Lanka could face balance-of-payments pressure due to
foreign outflows from government securities, a government
document showed last month, even as the island nation was in the
process of raising up to $2.5 billion from foreign
($1 = 151.2000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by