COLOMBO, March 16 The Sri Lankan rupee ended
weaker on Thursday on dollar demand from importers, but moral
suasion by the central bank capped the fall after expectations
of a nearly $1 billion inflow from a bond sale failed to ease
pressure on the currency, dealers said.
Dealers said the banking regulator had been preventing spot
rupee trades below 151.35 per dollar and two-week forwards below
153.30 per dollar. Central bank officials were not available for
The spot currency was quoted at 151.75/152.75 per dollar,
but was not traded.
Rupee forwards were active, with two-week forwards
ending at 153.10/25 per dollar, compared with Wednesday's close
"There was moral suasion. The rupee is weakening because of
the dollar demand and uncertainty," said a currency dealer,
asking not to be named.
On Tuesday, the central bank reversed a transaction on
two-week rupee forwards that was weaker than 152.60 per dollar,
dealers said at the time.
The central bank, on behalf of the government, raised a
record $973.25 million through a Sri Lanka Development Bond
auction on Tuesday and inflows are expected from Friday.
The expectation of inflows did not, however, change the
perception of the rupee, which has been under pressure for more
than three months.
The currency has depreciated 1.6 percent so far this year,
having lost 3.9 percent against the dollar last year. Dealers
expect the rupee to depreciate between 6 percent and 8 percent
Meanwhile, the central bank is struggling to maintain a
flexible exchange rate in the face of heavy foreign outflows
from government securities.
Foreign investors bought a net 1.87 billion rupees ($12.4
million) worth of government securities in the week ended March
8, recording the second weekly net inflow for the year.
However, they have sold a net 61.89 billion rupees of such
instruments so far this year.
The country also missed its end-December net internal
reserves target set by the International Monetary Fund for a
$1.5 billion loan approved last year.
Since then, the central bank has been hardly selling dollars
to defend the currency, dealers said.
Last week, the IMF urged the central bank to rebuild foreign
reserves while maintaining exchange rate flexibility.
($1 = 151.7500 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by