COLOMBO, Nov 17 (Reuters) - The Sri Lankan rupee on Friday closed weaker due to a surge in importer demand for the U.S. currency amid seasonal imports ahead of the year-end festive season and on dollar buying from a foreign bank, dealers said.
The market expects higher seasonal imports and a pickup in motor vehicle buying after taxes were slashed in last week’s budget weighed on the local currency, they said.
The spot rupee, which was earlier traded steady amid exporter dollar conversions, closed at 153.75/8 per dollar, compared with Thursday’s close of 153.60/75.
“There were exporter dollar conversions in early trade. But suddenly we saw a surge in dollar demand as a foreign bank started buying dollars, probably for bond selling and other banks bought for general imports,” a currency dealer said requesting anonymity.
“The next week will be crucial given there will be a surge in imports. But in December, we expect the rupee to recover as remittances are expected before Christmas and New Year.”
The market also expects the currency to be under pressure with people importing more lower-end vehicles on which the government has already reduced taxes.
The government imposed new taxes on high-end motor vehicles, telecoms, banks and liquor in a bid to boost revenues in its 2018 budget outlined last week, as the budget deficit for the current year slipped to 5.2 percent of GDP.
The rupee has slipped 2.7 percent so far this year.
Foreign investors had invested a net 19.6 billion rupees ($127.6 million) in equities this year, as of Friday’s close, and 45.7 billion rupees in government securities, as of Nov. 15, official data showed.
$1 = 153.6000 Sri Lankan rupees Reporting by Shihar Aneez; Editing by Sherry Jacob-Phillips