July 13, 2017 / 6:42 AM / 6 months ago

Sri Lankan rupee slips on importer dollar demand; stocks down

COLOMBO, July 13 (Reuters) - The Sri Lankan rupee fell slightly on Thursday as importer dollar demand outweighed mild selling of the U.S. currency by banks and exporters, dealers said.

The spot rupee was trading at 153.75/80 per dollar 0618 GMT, compared with Wednesday’s close of 153.65/75.

“There is (importer) demand. We can also see demand from state banks,” said a currency dealer, asking not to be named.

The central bank has completely stopped defending the rupee unlike in the past, Deputy Governor Nandalal Weerasinghe told Reuters on Wednesday.

“Since February, we have been only buying dollars. We are not selling at all. We do not see any pressure on the rupee. It is market-driven demand and supply,” he told Reuters in an interview.

“If we do not intervene and buy, probably it will appreciate. We are buying and preventing certain appreciation.”

The market has priced in further depreciation due to the central bank’s no-intervention policy, dealers said.

The rupee has been under pressure since early this year after the central bank stopped providing support for the currency at a time when the island nation faces a balance of payments crunch. It has fallen around 2.6 percent so far this year.

The spot rupee resumed trading on June 19 for the first time since May 5, when the central bank fixed its reference rate at 152.50.

Dealers said they expected seasonal demand for dollars to pick up from August.

The central bank is compelled to buy dollars from the market to meet the reserve target set by the International Monetary Fund under a $1.5 billion, three-year loan programme.

Sri Lankan shares were down 0.15 percent at 6,735.84 as of 0619 GMT. Turnover was 150.9 million rupees ($982,421.88). ($1 = 153.6000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

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