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CORRECTED-Sri Lankan rupee edges down on importer dlr demand
March 13, 2017 / 6:17 AM / 6 months ago

CORRECTED-Sri Lankan rupee edges down on importer dlr demand

(Corrects Friday closing figures for two-week forwards in second paragraph)

COLOMBO, March 13 (Reuters) - The Sri Lankan rupee eased slightly on Monday due to importer dollar demand, with the market awaiting inflows from sovereign and development bonds to see if the local currency would reverse its falling trend, dealers said.

Rupee forwards were active, with two-week forwards trading at 152.30/45 per dollar, compared with Friday’s close of 152.25/45.

“We see some importer demand because of the first day of the week,” a currency dealer said, asking not to be named.

“We have seen some volatility in the past as the central bank did not intervene as it used to earlier.”

Lack of central bank intervention in the market comes after the country missed the end-December net internal reserves target set by the International Monetary Fund for a $1.5 billion loan approved last year.

The IMF on Wednesday urged the central bank to rebuild foreign reserves while maintaining exchange rate flexibility.

Dealers said the market is awaiting dollar inflows from a $1.5 billion sovereign bond and a Sri Lanka Development Bond auction scheduled for Tuesday in which the government expects to raise $830 million.

Dealers expect the rupee to depreciate between 6 percent and 8 percent this year.

S&P Global Ratings said last week that it considers exchange rate stability to remain a major priority for Sri Lanka’s policymakers and its central bank, limiting monetary flexibility.

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 1.1 percent so far this year, having lost 3.9 percent of its value against the dollar last year.

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. They have sold a net 61.89 billion rupees of such instruments so far this year.

Sri Lankan shares were down 0.3 percent at 6,066.80, as of 0603 GMT. Stockbrokers attributed the fall to speculation of a rate hike after the IMF last week urged the central bank to stand ready to tighten interest rates.

Turnover stood at 62.8 million rupees ($415,207).

$1 = 151.2500 Sri Lankan rupees Reporting by Shihar Aneez; Editing by Sunil Nair

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