COLOMBO, Sept 10 (Reuters) - The Sri Lankan rupee ended weaker on Monday as importer dollar demand surpassed greenback sales by banks and the U.S. currency strengthened globally, dealers said.
The dollar traded higher against a basket of currencies amid fears of a potentially major escalation in the China-U.S. trade conflict.
The rupee hit a fresh low of 162.65 per dollar on Thursday, hurt by strong demand for the dollar from importers amid weakness in regional currencies, before the central bank cut the net open positions (NOP) of commercial banks, forcing banks to sell dollars.
Nandalal Weerasinghe, Senior Deputy Governor at the central bank, said on Friday the monetary authority had observed commercial banks were building up their positions without any fundamental reasons, which led to the cut in NOP.
The local currency, which hit a low of 162.42 in intraday trade on Friday, ended at 162.35/45 per dollar, compared with Friday’s close of 161.90/162.10.
Junior finance minister Eran Wickremaratne last week told Reuters that the government would leave the rupee for market forces to decide.
The currency has weakened 0.56 percent so far this month after a 1.2 percent drop last month, and has declined 5.8 percent so far this year. It will be under depreciation pressure due to year-end seasonal importer dollar demand, dealers added.
The rupee is also hurt by weakness in the Indian rupee . India is Sri Lanka’s biggest trading partner and the Indian rupee, which also hit a record low on Monday, has been one of the worst performers in Asia this year.
Foreign investors sold government securities worth a net 6.44 billion rupees ($39.68 million) in the week ended Sept. 5, extending the net outflow so far this year to 53.3 billion rupees worth of securities, central bank data showed. ($1 = 162.3000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)