COLOMBO May 9 Sri Lankan rupee forwards ended
slightly firmer on Tuesday due to exporter dollar sales and
inward remittances, while trading was dull ahead of a two-day
Sri Lanka's central bank does not want to allow the rupee to
fall "too quickly", Governor Indrajit Coomaraswamy said earlier
in the day, but suggested further weakness in the exchange rate
is on the cards as policy makers sought a competitive currency.
The downward adjustment on the spot currency was to make the
rupee more competitive, he added.
"That shows where the rates should be. So we are going to
gradually let the reference rate go a little bit. We are trying
to see whether we can compress that (gap) and let the reference
rate move in the direction of what seems to be the market rate."
The monetary authority, before the markets opened, kept the
policy rates steady as expected saying inflation is expected to
decelerate to mid-single digit levels by end-2017.
Rupee forwards were active, with the spot-next ending
at 152.65/75 per dollar, firmer from Monday's close of
152.80/85. Two-week forwards ended steady at 153.10/20.
The spot rupee, which resumed trading on Friday
after four months, was not active on Tuesday, with the central
bank's reference rate at 152.10.
Sri Lankan markets will be closed on Wednesday and Thursday
to mark a Buddhist religious holiday.
Sri Lanka drew a blowout response in its return to the
international bond market, attracting orders of more than $11
billion from 500 accounts for a $1.5 billion 10-year bond.
Coomaraswamy said the sovereign bond inflows are expected by
end of this week.
Currency dealers expect higher dollar liquidity from the
inflows to help stabilise the rupee.
The country also expects another $1 billion from two
separate syndicated loans, and the central bank chief said a
$450 million syndicated loan is almost decided and the inflows
are expected next week.
The central bank has allowed the currency to gradually
depreciate since mid-December, revising its spot reference rate
multiple times. It has said that defending the currency with
foreign exchange reserves did not "seem sensible".
The island nation has seen inflows into equities and
government securities since early April.
($1 = 152.3000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil