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7 months ago
Sri Lankan rupee weaker on foreign bank dollar demand
January 18, 2017 / 8:11 AM / 7 months ago

Sri Lankan rupee weaker on foreign bank dollar demand

COLOMBO, Jan 18 (Reuters) - The Sri Lankan rupee traded weaker on Wednesday due to importer dollar demand, after sales by foreign banks had helped the U.S. currency to edge up in the previous two sessions, dealers said.

The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, while the central bank has adjusted the spot rupee reference rate to a record low of 150.15 rupees per dollar.

Rupee forwards were active, with two-week forwards trading at 150.70/75 per dollar at 0732 GMT, weaker from Tuesday's close of 150.55/65.

"Foreign banks bought dollars after two days of sales. As the dollar supply fell, there was demand for dollars," a currency dealer said, asking not to be named.

The spot rupee, which did not trade for nearly a month, resumed trading on Tuesday. The spot rupee was quoted around the central bank's reference level of 150.15 per dollar, dealers said.

Dealers said the market is awaiting to see the results of the Sri Lanka Development Bond (SLDB) sale proceeds. The central bank announced to sell $225 million dollar worth SLDB with the settlement scheduled on Jan. 23.

Dealers expect the pressure on the rupee to ease if the central bank raises all $225 million it expects to sell.

The rupee is under pressure due to exit of foreign investors from government securities. They sold a net 16.1 billion rupees ($107.3 million) worth of government securities in the week ended Jan. 11, latest central bank data showed.

The central bank's moral suasion in early January prevented a sharp fall in the rupee even as the monetary authority signalled a change in its intervention policy.

Central Bank Governor Indrajith Coomaraswamy said earlier this month that defending the rupee with foreign exchange reserves "does not seem sensible" as it has always been followed by a sharp depreciation in the currency.

As of 0744 GMT, Sri Lankan shares were marginally up by 0.02 percent at 6,187.60. Turnover stood at 148.2 million rupees ($988,329).

$1 = 149.9500 Sri Lankan rupees Reporting by Shihar Aneez and Ranga Sirilal; Editing by Sherry Jacob-Phillips

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